A form of preferred stock that grants the holder the right (but not the obligation) to convert the preferred stock into common stock. Convertible preferred stock generally has a liquidation preference in an amount equal to the original purchase price plus any accumulated dividends. Dividends on convertible preferred stock may be paid currently or accumulated depending on the particular company. Under certain circumstances, generally on a qualifying IPO, Convertible preferred stock automatically converts to common stock for several reasons. First, underwriters prefer that a public company not have more than one class of stock so that all of the company's stockholders are on equal standing. Second, when a company goes public, the preferred stockholder has achieved a major private equity investment goal of liquidity and no longer needs the economic and contractual protection provided by preferred stock.