Preferred shares were explained to me once this way: Imagine I give you $1M for 10% of your business. You now own 90% of a business that has $1M in assets. You

Preferred shares were explained to me once this way: Imagine I give you $1M for 10% of your business. You now own 90% of a business that has $1M in assets. You easily sell the whole business for $900k (giving away $100k to the buyer, basically), give me back my 10% * $900k = $90k, and keep the remaining $810k for yourself. Preferred shares are a mechanism for preventing you from immediately liquidating my capital. An investment of time can't be liquidated as easily, so preferred shares are generally only for those making liquid investments. --- It seems there are probably other mechanisms for dealing with this problem, but this explanation makes _some_ sense.