Richards Kibbe & Orbe LLP partner William Orbe published “Convertible Preferred Stock: How Preferred Is It?” a two-part series that appeared in The Hedge Fund Law Report.
Convertible preferred stock investments provide important benefits for hedge funds and other investors including, among other things, a liquidation preference and the right to convert the investment into common stock of the company. Nonetheless, an investor’s failure to rigorously negotiate a term sheet with respect to a convertible preferred stock investment before the specific charter provisions for the series are adopted can lead to inclusion of benefit-sabotaging terms.
This two-part series identified these risks and provides recommendations to assist investors in negotiating convertible preferred term sheets to fully capture the benefits of such investments. In the second installment, Mr. Orbe will cover the charter provisions governing liquidation preferences, conversions and amendments while the first installment addressed the charter provisions governing dividends.