Participating Convertible Preferred Stocks – PCP

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Definition: Participating Convertible Preferred Stocks – PCP

Participating Convertible Preferred Stocks or PCP Shares are equity holdings that provide the investors with the right to claim earnings that are in excess (also to the common-stock shareholders) and in addition to the preferred dividends given by the company.

These PCPs are used commonly in the financing of venture capital. When the venture capitalists decide to exit a startup investment that they financed, during that time they often exercise this option of converting the Participating Convertible Preferred Stocks to common stocks. The cash flow of the security is determined by the type of exit option taken by the venture capitalists i.e. either by initial public offerings or by trade sale.

The industry lobbying and advocacy for venture capitalists is done by an organization called the National Venture Capital Association. In the Global Insight research study carried out in 2009, it was found that 12.1 million jobs were generated by companies that had a venture capital backing in the United States. Also such companies generated total revenue of $2.9 trillion in 2006 in the United States.


Hence, this concludes the definition of Participating Convertible Preferred Stocks – PCP along with its overview.

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