Liquidation preference specifies the peeking order of creditors during bankruptcy...
A negotiated term of a round of venture capital financing that calls for certain investors to have all or most of their entire investment repaid if the company is liquidated. Often also triggered by a deemed liquidation (see paragraph 4, Section IV above).
The amount an investor is entitled to receive prior to any distribution to holders of common stock. For preferred stockholders, the liquidation preference is usually equal to the purchase price plus any unpaid accumulated dividends.
The contractual right of an investor to priority in receiving the proceeds from the liquidation of a company. For example, a venture capital investor with a "2x liquidation preference" has the right to receive two times its original investment upon liquidation.
A preference offered to certain investors to over the founders and investors in earlier rounds, upon liquidation of the ownership of the company.
The amount per share that a holder of a given series of Preferred Stock will receive prior to distribution of amounts to holders of other series of Preferred Stock of Common Stock. This is usually designated as a multiple of the the Issue Price, for example 2X or 3X, and there may be multiple layers of Liquidation Preferences as different groups of investors buy shares in different series. For example, holders of Series B Preferred Stock may be entitled to receive 3X their Issue Price, and then if any money is left, holders of Series A Preferred Stock may be entitled to receive 2X their Issue Price and then holders of Common Stock receive whatever is left. The trigger for the payment of the Liquidation Preference is a sale or liquidation of the company, such as a merger or other transaction where the company stockholders end up with less than half of the ownership of the new entity or a liquidation of the company.
Certain classes of stock but most typically preferred stock that may have a liquidation preference which entitles the holders to be paid first in the event of the liquidation of a corporation's assets.
