Preferred stock is a class of stock, which includes certain economic, control rights, and protections not given to common stockholders. Those provisions give the preferred stockholders special right which may include a liquidation preference, anti-dilution protection, and conversion rights. Control rights address issues related to voting and election of the board of directors.

Holders of preferred stock have claim over the firm’s earnings (and assets in case of liquidation) ahead of (senior to) the claim of holders of common stock (ordinary shares) but behind (subordinate to) the claims of bondholders and all other creditors.

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