undefined | Better HN

0 pointsadtac7y ago0 comments

Let's say the company gets acquired for $20M. Is it still possible for the other 90% to make $0? Or is the preference amount exactly equal to the invested amount?

0 comments

TuringNYC7y ago

Yes, it is possible to have 1.25 or 1.5x first money out liquidity preference. I'm not sure how common that is though, but I've seem it multiple times.

Also note, you can end up with negative returns since you may have paid taxes on the options.

SEE: https://www.nytimes.com/2015/12/27/technology/when-a-unicorn...

pge7y ago

Typically preference = invested capital, but there are exceptions where it could be more (usually only if investors were investing in a distressed situation)

j / k navigate · click thread line to collapse