Participating Preferred Stock

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Home Startup Terms Glossary Participating Preferred Stock

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.

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