Preferred Stock
A class of shares typically held by investors that comes with extra rights — like getting paid first in an acquisition — that common stock doesn't have.
Quick Answer
Why do investors want preferred stock instead of common stock?
Preferred stock includes downside protection — most commonly a liquidation preference that returns the investor's capital before common holders see anything — which common stock, usually held by founders and employees, does not carry.
- Liquidation preference is the most common protection attached
- Preferred terms vary significantly deal to deal
- Read the specific preference stack before assuming standard terms
The Lovie Advantage
Lovie tracks each preferred class's specific terms on the cap table, so the preference stack is visible, not buried in a stock purchase agreement.
See how this connects to Common Stock. For the formal definition, see Cornell Law School's Wex legal dictionary.
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