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Questions and Answers
What makes preferred shares generally worth more than common stock before conversion?
What makes preferred shares generally worth more than common stock before conversion?
- Convertible feature
- Liquidation preference (correct)
- Lower risk exposure
- Higher voting rights
How does the post-money valuation affect the liquidation preference in this context?
How does the post-money valuation affect the liquidation preference in this context?
- It increases the liquidation preference for preferred shareholders (correct)
- It has no impact on the liquidation preference
- It decreases the value of common stock
- It reduces the liquidation preference for preferred shareholders
What happens if the sale price is exactly $36 million in the scenario?
What happens if the sale price is exactly $36 million in the scenario?
- $6 million goes to Series A and $30 million goes to Series B (correct)
- $36 million goes to common shareholders
- $36 million goes to Series B only
- $36 million goes to Series A only
What role does participation rights play in the calculation of proceeds for investors in this scenario?
What role does participation rights play in the calculation of proceeds for investors in this scenario?
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