Preferred stock

In accounting, preferred stock means a class or series of stock with rights common lacks, set out in the charter — usually a liquidation preferenceEquity & financingLiquidation preferenceA preferred stockholder's right to be paid a stated amount — usually 1× the original issue price plus declared but unpaid dividends — before common stockholders in a sale or liquidation. Non-participating preferred takes the greater of that or its as-converted share; participating preferred takes both, conversion into common, anti-dilution protectionEquity & financingAnti-dilution protectionA charter provision that lowers preferred stock's conversion price when the company later sells stock below it. Broad-based weighted average moves it part way, by CP2 = CP1 × (A + B) ÷ (A + C); full ratchet moves it all the way down to the new price, protective provisionsEquity & financingProtective provisionsActions the company may not take without the consent of a set majority of the preferred — selling the company, changing the charter against the preferred, creating a senior class, changing authorized shares, paying dividends, changing the board's size and board seats. What investors buy in a priced roundEquity & financingPriced roundA financing in which investors buy a new series of preferred stock at a stated price per share, on a negotiated pre-money valuation — as opposed to a SAFE or note, which defers the price. Converting SAFEs and notes convert at its close, and what a SAFEEquity & financingSAFECash from an investor in exchange for a right to shares in a future priced round, usually at a valuation cap or a discount. Not debt and not yet stock; because a SAFE can require cash on a change of control, it is often classified as a liability under ASC 480 and remeasured at fair value — the terms decide converts into.