Capital Stack

For technical documentation, please see CapitalStack

A Capital Stack refers to the variety of economic claims against a company's assets and cashflows. It also refers to the mix of financing that a company uses to fund its operations and growth. The capital stack is composed of different forms of debt and equity. The capital stack dictates which stakeholders receive assets in the event of a company's liquidation, recapitalization, merger, or acquisition.

Each Mezzanine company is deployed with a capital stack. A Mezzanine capital stack is comprised of seniority levels and assets. Seniority levels dictate the prioritization of the payments to stakeholders during a company's liquidation, recapitalization, etc. Each seniority level can contain up to 15 assets, and a company can have up to 15 seniority levels.

Both seniority levels and assets are characterized by an asset class. There are three different types of asset classes in Mezzanine:

  1. Common Equity

  2. Preferred Equity

  3. Debt

The following truisms exist for every capital stack in Mezzanine:

  1. A debt seniority level cannot be inserted below a common equity or preferred equity seniority level

  2. A preferred equity seniority level cannot be inserted below a common equity seniority level nor above a debt seniority level

  3. A common equity seniority level cannot be inserted above a preferred equity or debt seniority level

Mezzanine assets cannot be inserted into a seniority level that does not match their asset class. For example, only Preferred and Common shares can be inserted into common equity and preferred equity seniority levels, respectively.

Below is an example of a capital stack in Mezzanine:

In the above example, debt asset, F, would be paid out before D and E in the event of a company's liquidation, while D and E would be paid out before the liquidation preferences of B and C.

Unlike departments and modules, developers cannot add custom assets to the capital stack. Third-party creations are likely prone to potential errors that conflict with other functions, like liquidation. Moreover, untested asset types may lead to unpredictable methods of exploitation.

Each Mezzanine company is created with a single Common Equity seniority level that contains its common shares. This remain as the entire capital stack until the company decides to add to it.

Share Classes

All shares represent assets that have equity-like claims to underlying assets. Shareholders also control governance. There are two types of share classes in Mezzanine: common shares and preferred shares. There are a few notable differences between the two:

  • Each Mezzanine Company can have only a single set of common shares but can have multiple sets of preferred shares

  • Common shares will always have a voting weight of one, while the voting weight of preferred shares is bespoke

  • Common shares have no liquidation preference, while preferred shares can have a liquidation preference

More details on the following Share Classes section.


The initial version of the Mezzanine protocol has no debt assets and does not yet support liquidation, recapitalization, mergers, or acquisitions. Debt assets can easily be enabled modularly by the Mezzanine team without upgrading contracts. Liquidation, recapitalization, etc. will be added via contract upgrades.

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