Preferred Stock

Preferred stock, despite its name, is not stock. It is, rather, a hybrid that has some characteristics of stock and some characteristics of debt. In the event of a liquidation of the corporation, holders of preferred stock must be paid 100% before the holders of common stock may be paid anything (and creditors of the corporation must be paid 100% of what they are owed before holders of preferred stock may be paid anything). See the DailyDAC Priority Ladder for more information.