What Is Preferred Stock? How It Differs From Common Stock

Preferred stock is a share that puts you ahead of common shareholders for dividends or in a wind-up, and in return usually has no vote. How much priority you get depends on the country. A German preference share from VW or Henkel is essentially a common share without a vote and with a few cents more dividend. American preferred stock, as issued by Strategy or Strive, is closer to a perpetual bond in share form: a fixed rate on a stated amount, no share in growth.

Common and preferred stock: the basic idea

When you buy a share, you become a part-owner of a company. With common stock this means: you can vote at the general meeting, you get whatever dividend is declared, and you own a slice of everything left after all debts are paid. If the company grows in value, your slice grows with it. If it fails, you are paid last, usually nothing.

Preferred stock trades part of these rights for priority. What is traded is not in the name but in the articles of association or the prospectus. Three building blocks keep coming up:

1. Voting rights: usually removed. Sometimes they revive when dividends are missed.
2. Dividend priority: the preferred share gets its dividend before the common share gets anything, or it gets more.
3. Rank in a wind-up: if the company is liquidated, preferred stock is paid before common stock, but after all creditors.

Depending on how these three blocks are mixed, you get a security that behaves almost like a common share, or one that behaves almost like a bond.

The differences at a glance

In German, the middle and right-hand columns share the same name, "Vorzugsaktie". For you as an investor they are two very different things.

Preference shares in Germany: VW, Henkel and the Stock Corporation Act

The German Stock Corporation Act (Aktiengesetz) covers preference shares in sections 139 to 141. The rules are short:

• Shares with a preference in the distribution of profit may have their voting rights removed.
• The preference can be a prior dividend (an amount paid to preference holders first) or an additional dividend (a premium on top of the common dividend).
• A prior dividend must be made up later if missed, unless the articles say otherwise. What that means in detail is explained in What does "cumulative" mean for preferred stock?.
• Non-voting preference shares may make up at most half of the share capital.
• If the preference is missed and not made up in time, preference holders gain voting rights until the arrears are paid.

In practice, German preference shares serve one main purpose: a family or a major shareholder keeps control through the common shares while the company raises equity on the stock exchange through the preference shares. At VW, Porsche SE holds the majority of voting rights; at Henkel, the founding family pools a majority of the common shares. Buying the preference share means giving up a vote that would carry little weight against such majorities anyway.

So a German preference share is a share with the full company risk. It does not protect you from price falls; it only gives you a small priority in the distribution of profit.

And in Austria and Switzerland?

The Austrian Stock Corporation Act also allows non-voting preference shares, built on similar ideas as in Germany. In Switzerland, the Code of Obligations allows preference shares (Art. 654 CO). More common there, however, is the participation certificate (Partizipationsschein, Art. 656a CO): a share of capital without voting rights, which Lindt & Sprüngli or Schindler, for example, list next to their registered shares. Here too the security depends on the company like a share; a fixed rate is not part of it.

Preferred stock in the US: a share with a bond's character

In the US, "preferred stock" usually means something else. Typical features are:

• A stated amount (or liquidation preference), traditionally often $25, $100 for the bitcoin issues.
• A dividend rate on that amount, fixed (for example 10% on $100 = $10 a year) or variable.
• No voting rights, except on changes that affect preferred holders directly, and sometimes after a long run of missed dividends.
• No maturity. The company never has to repay the stated amount, but may buy it back under certain conditions.
• A fixed place in the ranking: after all debt, before the common stock.

Because the dividend is tied to a stated amount, the price hovers around it. It rises when interest rates fall or the company looks safer, and it falls when rates rise or doubts appear. You do not share in the company's growth: if profits double, your dividend stays the same.

How bitcoin companies use preferred stock

Bitcoin treasury companies have a funding problem: they want to buy more bitcoin than their business earns. There are three ways to do it. New common shares dilute existing shareholders. Bonds must be repaid on a fixed date, and that date may fall in a bear market. US-style preferred stock sits in between: it has no repayment date, and the money buys bitcoin without issuing new common shares.

For common shareholders this is leverage. If preferred holders receive 10% a year and bitcoin rises faster in the long run, the surplus belongs to the common shareholders. How this looks at Strategy is shown in the article on Strategy's capital structure.

As of November 2026, bitcoin preferred shares come from five issuers, all tracked on the Digital Credit page:

As of November 2026, from the issuers' filings as recorded on the Digital Credit page.

All of them follow the US pattern: a rate on a stated amount, no share in bitcoin's gains, ranking ahead of the common stock. They share a name with the VW preference share, but not its behaviour. An overview of all of them is in Digital Credit explained.

Common or preferred at the same bitcoin company?

The difference is clearest when you compare both classes of the same company. At Strategy, MSTR is the common stock and STRF a preferred stock.

This gives a simple rule of thumb. If you want to take part in bitcoin's price, the common stock is the leveraged option and bitcoin itself the unleveraged one. If you want a running income with bitcoin as the collateral behind it, the preferred share is the tool. None of the securities gives you both at once. The comparison between bitcoin stocks and holding bitcoin directly is in Bitcoin stock or bitcoin?.

The hybrid: convertible preferred stock

A few securities combine both worlds. Strategy's STRK pays 8% and can be exchanged at any time for 0.1 MSTR shares. Metaplanet's MERCURY pays 4.9% and is also convertible into common shares. The exchange only pays off once the common stock has risen a lot; for STRK, at the 12 Nov 2026 price, MSTR would need to exceed $671, and it stood at $114.41. The details are in the comparison of STRF, STRK, STRD and STRE.

How to tell from the prospectus which kind you are buying

The name doesn't help. These five details decide:

1. Is there a stated amount with a fixed rate? Then it is US-style preferred stock. If it only mentions an "additional dividend" or "prior dividend", it is a German-style preference share.
2. Is the dividend cumulative? Does the company make up missed dividends or not?
3. What is the rank? Ahead of or behind other preferred stock, and how much debt sits in front?
4. What is the liquidation preference? What do you get per share in a wind-up? More in What is a liquidation preference?.
5. When can the company buy it back? A redemption right caps your price gain.

Where to find these details in an SEC filing, and how to find the filing, is shown in How to read a prospectus for preferred shares.