Thanks for the detailed explanation. I am wondering if its ever possible to board to later approve that those newly bought "common" stocks get converted to "preferred" i.e., have the same liquidation preference?
It is of course possible and just requires a board vote, but since the company doesn't receive the funds and have them, it wouldn't be a good idea.
So it's possible of course, but isn't done 99.99999% of the time.
Now if they were purchasing $1B in preferred and another $100MM in secondary maybe, but certainly not when the common shares amount is $9B would put the other existing investors in jeopardy for their own preferred shares providing their invested capital back should things go south.
No sane board would ever convert common to preferred because a venture-backed Board represents the preferred shareholders. Before an IPO the preferred converts to common, but not the other way.
So it's possible of course, but isn't done 99.99999% of the time.
Now if they were purchasing $1B in preferred and another $100MM in secondary maybe, but certainly not when the common shares amount is $9B would put the other existing investors in jeopardy for their own preferred shares providing their invested capital back should things go south.