How is preference calculated?

The preference amount you see in Capshare relates to the liquidation preferences of the security that the holding was issued from. You’ll see this amount in a few different places, such as the security and issuance pages:

The preference amount is calculated using the outstanding share count multiplied by the original issue price of the security (not the purchase price per share), multiplied by the liquidation preference multiplier. In the above screenshot we can see that the preference amount is $150,000. The original issue price for this security is $1, with a 1.5X liquidation preference multiplier. 100,000 x $1 x 1.5 = $150,000.

Another security property that can affect the preference is cumulative dividends. Depending on the compounding policy, calculating those can be a bit more complex. The way dividends are calculated are using a basis and performing an interest calculation on that basis. The basis is calculated using the original issue price of the security, multiplied by the outstanding share count. In the above example, the basis would be $100,000.

As an example, assume that the security in the above scenario doesn’t compound dividends, uses a 365 days in a year setting (this can be found under Cap Table > Settings), and a 5% rate. To calculate the current dividend amount you would multiply the basis by the interest amount, and divide it by the days in a year count. E.g. $100,000*0.05/365. That will give you a daily rate, which you can multiply by the number of days between the grant date and today. In this case it’s 265, which gives us an accrued amount of $3,630.14. That brings the preference total to $153,630.14:

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