Module
Liquidity
5 min read
The illiquidity problem
If your company is private, your shares aren't easy to sell. Even when you've fully vested and exercised, the only buyer is usually the company or the next investor. The 409A valuation tells you what the IRS thinks your shares are worth. It does not tell you what someone will pay.
Liquidity event types
IPO: the company goes public. Vested shares can usually be sold after a lock-up window (commonly 90–180 days for insiders, sometimes longer). Acquisition or merger: shares convert per the deal terms. Tender offer: a company-organized opportunity for employees to sell some of their shares to new investors at an agreed price. Tender offers are voluntary and limited.
Lock-ups and blackouts
Even at public companies, you can't always sell. Insiders are blacked out around earnings. Post-IPO lock-ups commonly run 90–180 days. Plan around your real selling windows, not around vest dates.
Planning, not predicting
Don't make financial commitments based on paper value. Don't count on equity for short-term cash needs. If your company has a public market, build a sale plan. If it doesn't, treat equity as upside, not income.
Educational only. Not tax, legal, or financial advice. Talk to a qualified advisor.