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Common Stock Equivalent

Ipreo is continually looking to expand our offerings, as evidenced by recent acquisitions (read the press release announcing our recent purchase of iLEVEL).

As our stable of products and services grows, the Ipreo Blog will be incorporating and highlighting thought leadership content from within those spaces.

This week, we’re sharing a piece from within our private capital markets group, covering the Common Stock Equivalent.

Common Stock Equivalent (CSE) is one of those phrases that most financiers automatically know but can’t always define exactly. So what is Common Stock Equivalent and, more importantly, what should it mean to you? Not a bad idea for a refresher, even if you know the terminology inside and out. At the basic level CSE refers to a view of a current capital structure in which all classes of securities are considered to have equal rights as common stock. It operates under the assumption that no preferred rights or preferences exist, except those given to common stock.

Let’s go a little deeper with it. This means that no share of any class is any different than the other. It assumes all series are to be converted to common stock on the date of measurement. For example, if there was a Series A round that closed with a 1x liquidation preference and an 8% accruing dividend, Series A would no longer have those preferences. Everything is simply common stock.

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