What is a liquidity event?
A liquidity event is a transaction or event that converts illiquid equity in a private company into cash or freely tradable securities, allowing founders, employees and investors to monetise their holdings. The primary liquidity events are acquisition, IPO, secondary sale and certain dividend recapitalisations.
Liquidity events are the principal returns mechanism for venture capital and the central planning milestone for startup founders. Tax planning, drag-along/tag-along rights, registration rights and lock-up provisions all shape the eventual liquidity-event outcome.