Startup Terms Glossary
What is Participating Preferred Stock?
Participating Preferred Stock refers to shares that are guaranteed to pay standard dividends plus a pre-determined extra dividend based on an agreed upon factor. This type of stock is attractive to shareholders because it has the potential to turn a larger profit than some other types of stock. However, participating preferred stock is rare. It most frequently is issued following an extreme event such as a hostile takeover.
Participating Preferred Stock Examples
Some key points participating preferred stock include:
- Example 1. Ranks above common stock but below debt during liquidation
- Example 2. Often a priority during liquidation events
- Example 3. Pays preferred dividends plus additional dividends
This page discusses participating preferred stock.