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Definition of Non-Participating Preferred Stock

Non-participating preferred stock is a type of preferred stock. In a liquidation or acquisition, investors who hold non-participating preferred stock must choose between receiving their liquidation preference or converting into common stock and receiving payment from the liquidation or acquisition equal to their ownership percentage alongside the other common stockholders. Non-participating preferred stock is by the most commonly used form of preferred stock in US venture financings. A much less common type (due to its investor-friendly structure) is participating preferred stock.

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