You're correct, at a liquidity event the value of common and preferred shares could converge. A term called "participating preferred shares" would mean that the

You're correct, at a liquidity event the value of common and preferred shares could converge. A term called "participating preferred shares" would mean that they don't. But most capital structures I have seen are such that earlier in the story (pre liquidity event), the values of the two shares are drastically different.