Preferred stock

Also called: preferred shares

In one line

The share class investors receive, carrying priority rights — most importantly getting paid back before common in an exit.

In plain English

Investors buy preferred because it protects them: special rights on payout, voting and anti-dilution. Its price per share is usually higher than what common is really worth.

If you were explaining it to a 5-year-old

These are the VIP guests who get first pick of the cake and a comfy chair, because they paid for the party.

Why it matters when you sell

The gap between the preferred price (the headline valuation) and your common's real value is exactly why your stake is usually discounted when you sell.

Put it to use

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Sources

A general market-practice term. See how we define and source the glossary in our methodology. General information, not advice.

Educational information only — not financial, tax or legal advice, and not an offer to buy or sell any security. Definitions are general; your own documents and local law govern your situation. PrivateTechShares is independent and not a broker or marketplace.

Preferred stock

Related terms

Put it to use