Preferred shares are a type of share that gives shareholders partial ownership of a company and priority claim to dividends, but generally no voting rights.
For example, an investor acquires $500,000 worth of preferred shares in a startup, entitling her to a fixed 6% annual dividend and priority return of capital before common shareholders in any sale or wind-down — making her investment less risky than holding common shares.
Why it matters: They offer investors a safer position than common stock with guaranteed dividends, acting as a hybrid between debt and equity.
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