If my example (turning $200 million into $100 million) the investors don't get their full investment back. They lose half of it. But I get your point. And yes,

If my example (turning $200 million into $100 million) the investors don't get their full investment back. They lose half of it. But I get your point. And yes, it has something to do with leverage. But I also assert that the current system is better for common shareholders as well. The idea that we could have a slightly different world in which investors acted exactly as they did today, but bought common shares instead of preferred shares is clearly wrong. If they're buying common instead of preferred then valuations would drop significantly. Probably by over 50%. This means that either companies would be giving away much larger %s of themselves when fundraising or they would be raising much less capital (which is of course used to pay the salaries of all those common shareholders). Both are probably bad for common stockholders in most cases. Which is why we see very few companies ever do this.