Are preferred stocks more or less risky than convertible preferred stock?

In participating preferred stock, how does one calculate the pro rata basis for distributions given that the preferred stocks are not a portion of the ordinary stock?

• with reference to the following question :

• Answer:

  Like voting rights, distributions are almost universally calculated on an "as-converted" basis, meaning based on the number of common shares that the preferred shares would convert into.  Normally that starts off as 1-for-1 (one preferred share converts to one common share), so that after the liquidation preference is paid off, each preferred share is entitled to the same pay-out as each common share. Depending on events, and how they play out under the language in the amended articles/certificate and other documents, the conversion ratio may change due to declared but unpaid dividends, operation of antidilution provisions, or stock splits and the like.  Here is a the typical Series A term sheet language covering this: After the Liquidation Preference is paid out to the holders of the Preferred Shares, the remaining distribution shall be paid out ratably to the holders of the Common Stock and the Preferred Shares on a common-equivalent basis. Here, "ratably" just means "pro rata".  It's a term of art that seems to appear in venture finance documents and bankruptcy, thanks to lawyers' penchant for cut-and-paste.