Convertible Preferred Stock

April 28, 2015 by FundingSage -

Preferred stock that may be converted into common stock or another class of preferred stock, either voluntarily or mandatory.³

Related Terms

Series A Preferred Stock | Participating Preferred Stock | Pay to Play

Related Articles

The Holy Grail of Entrepreneurship: The Term Sheet, Part 3 – Capitalization Table

Convertible Note

FundingSage

Definitioner

HR

Human Relations

Preferred Stock

A class of ownership that has a higher claim on assets than Common Stock. In the event of Liquidation, preferred stock shareholders have priority over earnings and assets and generally earn dividends, but forego voting rights.²
A class of capital stock that may pay dividends at a specified rate and that has priority over common stock in the payment of dividends and the liquidation of assets. Many venture capital investments use preferred stock as their investment vehicle. This preferred stock is convertible into common stock at the time of an IPO.³
This is a type of corporate share where the holders can exercise more rights, preferences, and privileges than those with common stocks. It is often issued by private corporations or enterprises that have not gone public yet. Both angel investors and venture capitalists prefer to invest with preferred stock because of the superior rights and protective provisions associated with these shares.⁴

Common Stock

A class of ownership that has lower claims on earnings and assets than Preferred Stock. It is riskier to own common stock because in the event of Liquidation, common stock shareholders are the last to claim rights to assets.²
A unit of ownership of a corporation. In the case of a public company, the stock is traded between investors on various exchanges. Owners of common stock are typically entitled to vote on the selection of directors and other important events and in some cases receive dividends on their holdings. Investors who purchase common stock hope that the stock price will increase so the value of their investment will appreciate. Common stock offers no performance guarantees. Additionally, in the event that a corporation is liquidated, the claims of secured and unsecured creditors and owners of bonds and preferred stock take precedence over the claims of those who own common stock.³
This term represents a constituent in corporate ownership. People who own shares of common stock (common stockholders) often have voting rights in their company’s decision-making matters and executive board of elections. Through company dividends and capital appreciation of corporate assets, common stockholders can also share in their company’s financial success.⁴

Related Terms

Treasury Stock | Redeemable Preferred Stock | Series A Preferred Stock

Related Articles

Five Documents Required for Organizing a Business

3 Considerations for Advisory Board Compensation

Giving Away Startup Ownership: How Much Is Too Much?