Definition of liquidity

Definition

The ability to buy and sell stock is called liquidity. In startups and many private companies, it is often hard to sell stock until the company is sold or goes public, so there is little or no liquidity for shareholders until those events occur. Thus, sales and IPOs are called both exits and liquidity events. Sales, dissolutions, and bankruptcy are all called liquidations.

Related terms

More from The Holloway Guide to Equity Compensation

Fundamentals of Stock Corporations β€Ί Sales and liquidity

Often people wish they could sell stock in a private company, because they would prefer having the cash. This is only possible occasionally. We get into the details later, in our section on selling private stock.

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The Holloway Guide to Equity Compensation
Joshua Levy, Joe Wallin, and over 35 contributors
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Stock options, RSUs, job offers, and taxesβ€”a detailed reference, including hundreds of resources, explained from the ground up and made to be improved over time.