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is a form of equity ownership in a corporation that contains preferences over common stock. Typically these preferences include rights to receive dividends before holders of common stock. Sometimes they include preferences in voting, rights to veto certain company actions, or rights to cause their shares to be redeemed. In a liquidation of the company, preferred stockholders are paid before common stockholders but after all creditors. When used in venture capital transactions, preferred stock often includes a convertibility feature. That is, it is exchangeable for common stock at the will of the investor or upon the happening of some event. When preferred stock has this feature it is referred to as convertible preferred stock. See: Common Stock, Convertible Preferred Stock, Convertible Securities, Debentures, Preferred Stock Umbrellas. |
