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How do liquidation preferences and participation rights matter ?
You should read about both to understand how they can wipe common shareholders. One gives preferred holders the right to recoup a multiple of their investment before common shareholders get paid. The other allows preferred shareholders to participate and receive payout after their liquidation preferences (double dip). If an investor invests $10M in a company and has 5x liquidation preferences, she will get paid $50M before common shareholders get paid. If the company was sold for $50M, common shareholders get nothing. In the example above, the preferred shareholders will get the first $50M then they will participate with the common shareholders and ratably allocate the remaining proceeds among them. http://www.shakelaw.com/blog/vc-term-sheets-liquidation-preferences-participation/
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Total outstanding shares (preferred and common). Preferred price vs common price. Liquidation preferences and participation rights, if any, for preferred.