4 ms·

I personally wouldn't call it substantial. You can quantify the value of the liquidation preference by looking at the difference between the value of the prefe

by nugget 11y ago

I personally wouldn't call it substantial. You can quantify the value of the liquidation preference by looking at the difference between the value of the preferred shares and the value of common shares available on secondary markets. Once you have a company that owns its market, has healthy and growing revenue, etc, there is very little difference. This is what happened to Facebook and Twitter. I'm not familiar with Uber but I do track Pinterest and Airbnb and right now their common stock (no preference) sells for about a 10% discount to the latest preferred rounds. Square and Palantir, which people seem to have less faith in (for whatever reason), trade at a steeper but still not what I'd consider substantial discount.

foobarqux 11y ago
Preferred shares have different terms, they don't all have liquidation preferences. Even if they do, the preference is worth much less once the stock appreciates significantly. For example, if I get a preferred with liquidation preference at some price P then that is worth far more than the same security once the price appreciates to 3*P (since it acts more like a common share, the value of the preference being reduced [since the chance of it being useful is less]). And which secondary markets are those?
- nugget 11y ago
  The most active secondary markets I see today are the broker dealer successors to Frank Mazzola/Felix Advisor type outfits who use company approved (or tolerated) LLCs to vacuum up stock from ex employees who want liquidity. You have to find them or be referred to them and then they will periodically pitch you inventory as it becomes available. Chris Sacca is doing the same thing but it looks like a venture fund and (as far as I know) he holds to IPO, where on the east coast it looks like a private equity fund and they will allow intra-fund exchanges between old and new investors. Very little transparency in this market and probably the perfect breeding ground for the next Bernie Madoff style Ponzi scheme (not Frank or Chris who are both legitimate).

by nugget 11y ago

foobarqux 11y ago

Preferred shares have different terms, they don't all have liquidation preferences. Even if they do, the preference is worth much less once the stock appreciates significantly. For example, if I get a preferred with liquidation preference at some price P then that is worth far more than the same security once the price appreciates to 3*P (since it acts more like a common share, the value of the preference being reduced [since the chance of it being useful is less]). And which secondary markets are those?

nugget 11y ago
The most active secondary markets I see today are the broker dealer successors to Frank Mazzola/Felix Advisor type outfits who use company approved (or tolerated) LLCs to vacuum up stock from ex employees who want liquidity. You have to find them or be referred to them and then they will periodically pitch you inventory as it becomes available. Chris Sacca is doing the same thing but it looks like a venture fund and (as far as I know) he holds to IPO, where on the east coast it looks like a private equity fund and they will allow intra-fund exchanges between old and new investors. Very little transparency in this market and probably the perfect breeding ground for the next Bernie Madoff style Ponzi scheme (not Frank or Chris who are both legitimate).