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Ownership/Equity – Stock Basics

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Ownership/Equity – Stock Basics

The Deal: Preference Nitty and Gritty

A and B shake hands with Reid, but then notice something odd in the contract. His $500,000 buys a different class of stock than what they own. Reid's is "preferred," and theirs is just "common." Feeling gently insulted, they ask about it. This flavor of preferred stock doesn't pay a dividend and has no fancy terms. In many venture deals, preferred stock at this stage will carry other terms usually favorable to the investor, the most common of which is...

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