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Private Equity and Venture Capital Glossary



Definition Liquidity Preference

liquidation preference - Liquidity Preference is the right to receive a specific value for the stock if the business is liquidated. This is usually designated as a multiple of 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.


 

 
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