Skip to main content
Also known as: preferred shares, preferred equity

Preferred Stock

ConceptualFundraisingLegal

Definition

Preferred Stock: Preferred stock is a class of ownership with rights superior to common stock, typically held by investors. Preferences usually include liquidation preference, anti-dilution protection, and dividend rights. Preferred converts to common in an IPO or sometimes in an acquisition.

Example Usage

“VCs received Series A Preferred Stock with 1x liquidation preference and weighted average anti-dilution.”

Common Misconceptions

Preferred and common are worth the same. Preferences make preferred more valuable in most scenarios.
All preferred stock is the same. Each series can have different rights and preferences.
Preferred always stays preferred. It typically converts to common in an IPO.

Explore More Resources

Browse Tools

Discover 100+ vetted tools for every stage of your startup journey

Explore all tools

Build Your Stack

Take our personalized quiz to get tool recommendations for your startup

Start the checklist

Recommended Reading

Curated books to help you learn, grow, and succeed as a founder

View book recommendations

Listen & Learn

Top podcasts covering startups, product, growth, and entrepreneurship

Discover podcasts

Help us improve this definition

See something that could be clearer or more accurate? Let us know.

Help us improve this page

Found an error or have a suggestion? We'd love to hear from you.