Convertible Preferred Stock

Term Main definition
Convertible Preferred Stock

A type of capital stock in a company that is both (i) preferred stock, and (ii) convertible into shares of common stock at a specified conversion ratio (subject to adjustment by virtue of the operation of the anti-dilution provisions).

This form of capital stock provides the holder with a priority and preference on dividends, distributions, and liquidation over common stock and, in many cases, over other (junior) series of preferred stock. Convertible preferred stock is clearly the accepted medium and most commonly used form of security in angel or venture capital investment transactions.