Liquidity Event
What is a Liquidity Event? IPO, Acquisition, and Buyback Explained
A liquidity event is any occurrence that allows equity holders to convert their shares into cash. Until one happens, equity in a private company is paper wealth.
The most common types: IPO (shares become publicly tradeable), acquisition (buyer pays shareholders), company buyback (company repurchases shares at FMV), and secondary sale (employees sell to private investors with board approval).
For employees with stock options, the liquidity event is when ESOPs go from theoretical to real money. It's also when certain tax obligations are triggered. The average time to IPO for startups can be 8 to 12 years. Some companies never reach one.