Definition
Liquidity Preference
liquidation preference - Liquidity Preference is
the right to receive a specific value for the stock
if the business is liquidated. This is usually designated
as a multiple of the Issue Price, for example 2X
or 3X, and there may be multiple layers of Liquidation
Preferences as different groups of investors buy
shares in different series. For example, holders
of Series B Preferred Stock may be entitled to receive
3X their Issue Price, and then if any money is left,
holders of Series A Preferred Stock may be entitled
to receive 2X their Issue Price and then holders
of Common Stock receive whatever is left.
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Private Equity and Venture Capital Glossary
