Liquidation Preference

A liquidation preference is the right of investors holding preferred stock to get their money back first when a company is sold or shut down. If investors put $50 million into a company, a liquidation preference typically means the first $50 million from a sale goes to them before common stockholders receive anything. The size of the preference is stated as a multiple of what investors put in: 1x means they get back what they invested, and 2x means twice that.