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It might be if the earlier investors didn't have preference shares. Typically once you have a down round the common stock holders are wiped out if there have be

• jacquesm 11y ago
  > Typically once you have a down round the common stock holders are wiped out if there have been a significant numbers of preference share issued. That all depends on several unknowns at that time. It definitely increases the chances of the holders of common stock to be left without compensation if and when the company sells or there is some other 'liquidity event', but it definitely is not a given. A down round is simply the issuing of new shares at a different valuation than the previous shares. There could very well be a round at a higher valuation later on, the difference between the previous share issue and the current one could be small, the number of shares issued could be small to the number of shares already outstanding and so on.
  • danieltillett 11y ago
    Jacques all of these are true, but more typically once you go through a significant down round with a lot of new capital raised the common stock holder is wiped out. The holders of preference shares may be smart about it and make sure the current employees are protected, but you don't want to be a normal common stock holder.