Glossary - Liquidity Event
A liquidity event is an occurrence or transaction that allows founders and investors to sell part of or all their stakes in a company, thus converting their shareholdings into cash or an equivalent. This can include events like an Initial Public Offering (IPO), a merger, acquisition, or a direct sale of the company.
Also known as
- Exit Strategy
- Exit Event
- Harvest Strategy
Use cases examples
- Shareholders' Agreement: In the event of a liquidity event, such as an Initial Public Offering (IPO) or sale of the Company, the shareholders will be subject to the terms outlined in this agreement regarding the sale or distribution of assets.
- Investment Agreement: The Investor shall have the right, but not the obligation, to participate in any liquidity event on a pro-rata basis to their investment, as set forth in this Investment Agreement.
Considerations for investors
- Assessing the impact of a liquidity event on the return on investment.
- Considering the market conditions and timing for optimizing the outcomes of a liquidity event.
Considerations for founders
- Understanding the implications for control of the company after a liquidity event.
- Ensuring that the timing of a liquidity event aligns with personal and company goals.
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