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Participating liquidation preference: As an example, an investor invested $1M in a $6M pre-money valuation ($7M post) with a 2x participating liquidation preference. They would then own 14.4% ($1M/$7M) of the company and would get upside on any change of control.
Holders of participating preferred stock have the choice between two payoffs: a liquidation preference or an optional conversion. In a liquidation, they first get their money back at the original purchase price, the balance of any proceeds is then shared between common and participating preferred stock as though all convertible stock was converted.
Material Discount in Liquidation Preference Price: As part of the agreement, FlexShopper has the option to repurchase its Series 2 Preferred Stock at a 50+% discount to its liquidation preference. The current liquidation preference, as of the end of the second quarter of 2024, is valued at approximately $43 million, with an option to purchase ...
The post-money valuation formula does not take into account the special features of preferred stock. It assumes that preferred stock has the same value as common stock, which is usually not true as preferred stock often has liquidation preference, participation, and other features that make it worth more than common stock. Because preferred ...
In macroeconomic theory, liquidity preference is the demand for money, considered as liquidity. The concept was first developed by John Maynard Keynes in his book The General Theory of Employment, Interest and Money (1936) to explain determination of the interest rate by the supply and demand for money.
Preferred stock (also called preferred shares, preference shares, or simply preferreds) is a component of share capital that may have any combination of features not possessed by common stock, including properties of both an equity and a debt instrument, and is generally considered a hybrid instrument.
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"Pre-money valuation" is a term widely used in the private equity and venture capital industries. It refers to the valuation of a company or asset prior to an investment or financing. [1]