3 ms·
What do you mean common stock is discounted to preferred? If all goes to plan, does liquidity preference matter?
by andreyf 11y ago
What do you mean common stock is discounted to preferred? If all goes to plan, does liquidity preference matter?
- bcherry 11y agothey mean that the purchase price is discounted. a company with 5M shares outstanding might sell 1M shares for $5 each to Series A investor. Now they have 6M shares and a "30M valuation". But they're still giving common grants at a $1 strike price because common shares aren't as valuable as preferred shares at this stage. In sufficient liquidity, the gap will close.
- prostoalex 11y agoThe strike price for common stock is lower. So a company whose valuation might had been trumpeted in the media as $50 bil would issue common stock at, let's say, $15 bil valuation.