Liquidity event

Startups - shares - share options - shareholders' agreements.

In the context of a new company, owned privately by a relatively small group of shareholders, liquidity events arise on corporate actions such as an initial public offering, or a trade sale, acquisition or merger.

On a liquidity event, the early investors - including founders - generally have an opportunity to liquidate, or exit, their investments in whole or in part.

The early investors' previously illiquid, non-transferable, shares can be sold to new investors.

From the perspective of the early investor, their illiquid investment in shares in a private company - usually subject to a shareholders' agreement restricting transferability of the shares - becomes a more liquid investment that they can potentially sell for cash.

Some executive share options in startup companies may be specified as being exercisable only on the occurrence of such a liquidity event.

See also

• Acquisition
• Business angel
• Corporate action
• Crowdfunding
• Entrepreneur
• Equity
• Exercise
• Exit
• Illiquid
• Initial public offering (IPO)
• Liquid
• Liquidate
• Liquidity
• Merger
• Option
• Private company
• Private equity
• Seed
• Series A
• Series B
• Share
• Shareholder
• Shareholders' agreement
• Startup
• Trade sale
• Venture capital