What is preferred equity?
Preferred stockholders have ownership in a company. However, unlike common stockholders, preferred stockholders do not have voting rights or management rights. Founders and employees of a company are usually common stockholders.
Preferred stockholders are “preferred” because they typically receive dividends before common stockholders receive anything. Also, if the company is liquidated, preferred stockholders have a claim on the company’s assets before common stockholders (but after creditors, such as debt investors, bankers and lenders).
Generally, preferred stockholders have the right to receive dividends for as long as they own preferred stock. The exact calculation of how much they receive differs with each deal.
Who can make a preferred equity investment?
A preferred equity investment can be made under Regulation D (accredited investors only) or Regulation Crowdfunding (anyone can invest).
Businesses may choose the types of offerings they wish to conduct on NextSeed. They can offer a Regulation Crowdfunding debt/preferred equity investment, a Regulation D 506(c) debt/preferred equity investment, or offer both a Regulation Crowdfunding AND a Regulation D 506(c) debt/preferred equity investment simultaneously.
Note that Regulation Crowdfunding imposes investment limits on you, whereas Regulation D accredited investors do not have investment limits.
You *may* need to be an accredited investor.
If a business is only offering investments under Regulation D, and not Regulation Crowdfunding, then only accredited investors may participate.
By going to your Account Center, you can verify accreditation status under Profile > Limits.
Check out the Accredited Investor section for more information.
How do I make a preferred equity investment?
You will need to sign up and create an investment account on NextSeed. This investment account is held at our partner bank, GoldStar Trust. You will need to link your bank account to your NextSeed account so you can easily transfer funds in and out. All investments are made from your NextSeed account, and any distributions made by businesses will be transferred into your NextSeed account.
You can invest through the offering page by clicking on “Invest Now.”