[astanway]

Feels like this would make a total mess of a cap table. It’s effectively equity in all the ways that matter for minority preferred shareholders, except that it isn’t represented on the cap table and it’s got baked in pari passu treatment, which growth investors (rightfully so) won’t like. Even convertible notes mess with cap tables in ways I’d rather not repeat, as it prevents accurately valuing employee equity grants. Also, none of this would be eligible for QSBS, which is a knock against it for the investor.

Additionally - what is the purpose of repurchases if they don't also reduce the exposure the company has to claims on liquidation? Noting that "repurchase" is probably dangerous nomenclature - if these were to actually be interpreted as equity repurchases by the IRS, it could endanger QSBS status for all shareholders.