a recap is a pretty general term used to describe any time capital structure is meaningfully changed, but in this case (and oftentimes in the realm of VC-backed

a recap is a pretty general term used to describe any time capital structure is meaningfully changed, but in this case (and oftentimes in the realm of VC-backed co's) it usually refers to a situation where in connection with a new round of fundraising, existing stakeholders have their (preferred stock) rights meaningfully altered, and usually for the worse. this usually occurs in the context of a downround, where the new investor has a lot of leverage and the existing investors are effectively asked to give up some meaningful portion of their rights in order to sweeten the deal for the new investors, either by literally giving those rights up (usually by converting to common stock), or else by granting the new investors some very superior terms that diminish the existing investors rights (like a discount on IPO shares for new investors that existing investors do not get, or a higher-than-usual liquidation preference that supersede existing investors'. in contrast, the "cleanest" fundraising terms would be something like: new investors get the same rights as older investors, just with the price-per-share-based rights adjusted for the higher valuation the new investors bought at. (for reference, here's a good example of a widely read VC post where the term is used with that general framework: http://abovethecrowd.com/2016/04/21/on-the-road-to-recap/ http://abovethecrowd.com/2016/04/21/on-the-road-to-recap/) in some cases, a recap is also formulated to incentivize existing investors to put in more money by setting up a deal where existing investors who don't put in more money will end up with their shares converting to common stock (thereby losing their liquidation preferences and anti-dilution provisions), but those who put in their share (usually pro rata) will maintain comparable preferences to the new investors (or whoever is leading the round). (this is sometimes called pay to play, and it's one of the more common recaps i saw when i was an attorney) In this case, could be a novel spin on the same dynamics using a convertible note valuation cap: they are raising a down round (their last reported valuation was $300m, so a major down round here), and "Old investors were asked to pony up more money or see their stakes lose their value, according to one person familiar with the matter." it does not go exactly into the mechanism for how the value would be reduced, it might just be through straight up dilution (see note below), but in any case it seems like the ultimate objective is the same: using a new structure to reward new (or returning) investors who are willing to save the company in these (arguably self-imposed!) hard times, and push/punish existing investors who may have lost faith in the company. one thing I'd note: honestly, they seem to be implying a significant recap, but there's nothing specific in the article that points directly to any particularly unusual mechanisms. In fact, it's possible that this is just be a down round using a relatively straightforward convertible note with a cap, and even in that case the following statements that seem to imply a recap could still be true: "The value of shares that may be doled out to backers later will change depending on the company's subsequent valuation." (that can be true in a regular convertible note deal) and "Old investors were asked to pony up more money or see their stakes lose their value, according to one person familiar with the matter." (weirdly worded, but this could be true for any new infusion of capital). also, for relatively small investments ($5m) on mid/late stage companies, convertible notes are used just because they are fast/easy to negotiate and execute on, so i would not be surprised if this is just something like that - still, a major downround in any case!