Liquidation Preference Calculator

Enter an exit value and up to three preferred series to see what each class and common stockholders receive, and when preferred would rather convert.

Results

Common stock receives

Series A converts

$32,000,000

$3.2000 per common share, 53.3% of the exit

Preferred receives: $28,000,000; 46.7% of the exit for 39.4% of the shares
Preference stack: $25,000,000; Total of every preference (multiple x invested)
Exit vs preference stack: 2.40x; Exit covers every preference
Value per share as converted: $3.6364; Exit / all shares, if everyone were common

Payout by class
Class	Outcome	Payout	Per share	Multiple
Series A	Converts to common	$8,000,000	$3.2000	1.60x
Series B	Takes preference	$20,000,000	$5.0000	1.00x
Common		$32,000,000	$3.2000	-

Payout at different exit values

$20M

$20M$32MYour exit

$29M$73M

$27M$44M$109M

$15M$30M$60M$120M$180M

Series A
Series B
Common

For education only. Not tax, legal or investment advice.

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The math

How the exit waterfall works

When a company is sold, the money flows down a waterfall. Preferred stock is paid first, then whatever is left is split per share.

Pay preferences by seniority. Each series is owed its preference multiple times the amount it invested. With stacked seniority the latest series is paid first; with pari passu all series share pro rata to what they are owed.
Split the rest per share. Common, any series that converted, and participating series share the remainder by share count. A capped participating series stops at its cap and the excess goes to everyone else.
Let preferred choose. Non-participating (and capped) preferred can give up the preference and convert to common. A series converts only when that pays it more, and since one series converting changes what the others get, the calculator re-checks every series until nobody wants to switch.

1. Preferences: each series that does not convert gets
   min(multiple x invested, what is left), by seniority
2. The rest is shared per share by common, converted
   series and participating series (up to any cap)
3. Non-participating or capped series convert when
   their as-converted share is worth more

Assumptions and simplifications

Preferred converts into common one-for-one; conversion ratio adjustments from anti-dilution are not modeled.
A participation cap is the total a series can receive (preference plus participation) as a multiple of what it invested.
No accrued dividends, debt, transaction fees, management carve-outs, or escrows. Enter the exit value left for equity.
Seniority is either fully stacked (Series C, then B, then A) or fully pari passu; mixed structures are not modeled.

Worked example

$60M exit, Series A $5M and Series B $20M, both 1x non-participating

Series B (senior) preference: $20,000,000
Series A: preference or convert?: $5M vs $40M x 2.5M / 12.5M = $8M
Series A converts: Joins common
Left after preferences: $60M - $20M = $40M
Per share (12.5M shares): $40M / 12.5M = $3.20
Series A receives: $8,000,000

Common receives$32,000,000

Frequently Asked Questions

Common questions about the Liquidation Preference calculator and the math behind it.

What is a liquidation preference?

A right for preferred stockholders to get their money back, or a multiple of it, before common stockholders receive anything in a sale or wind-down. A 1x preference on a $5M investment means the first $5M that series is owed comes out ahead of common.

What is the difference between participating and non-participating preferred?

Non-participating preferred chooses: take the preference, or convert to common and take its pro rata share. Participating preferred takes the preference and then also shares in what is left alongside common. A cap on participation limits the total a participating series can receive, after which it would rather convert.

When does non-participating preferred convert to common?

When its pro rata share as common is worth more than its preference. Each series’ choice changes what is left for everyone else, so the calculator solves the decisions together: a series converts only when converting pays it more given what the other series do.

What does stacked versus pari passu seniority mean?

Stacked (standard) seniority pays the most recent series first, then the one before it, and so on. Pari passu means every series is paid its preference at the same time, sharing pro rata to the amounts owed if the exit does not cover them all. Many companies use a mix; this calculator offers the two common cases.

Why does common get so little at a low exit?

Because preferences come off the top. If the exit is below the total preference stack, common can get nothing even though the company sold for millions. The chart shows how the split changes as the exit value grows.

Does this include option holders, debt or deal fees?

No. Enter common shares including any options you expect to be exercised, and use the exit value left for equity holders after debt, transaction fees and any management carve-out.

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