What is a liquidation event?

Liquidation events can be voluntary or involuntary and exist to convert tangible and non-tangible assets into cash. A liquidation event might consist of the sale of a company in exchange for stocks or shares. It can also constitute an initial public offering, or offering shares of the company to the public to raise money for the business.

What happens when a company is liquidated?

The liquidation of a company is when the company's assets are sold and the company ceases operations and is deregistered. The assets are sold to pay back various claimants, such as creditors and shareholders. The liquidation process happens when a company is insolvent; it can no longer meet its financial obligations.

What does it mean to liquidate a property?

To liquidate means to convert assets into cash. For example, a person may sell their home, car, or other asset and receive cash for doing so. This is known as liquidation. Many assets are assessed based on how liquid they are.

Do founders want a liquidity event?

While most investors favor liquidity events, founders may not be so eager if the event means diluting their holdings or losing control of their company. A liquidity event is most commonly associated with founders and venture capital firms cashing in on their seed or early-round investments.