The Pros and Cons of Selling Pre-IPO Stock
Understanding the secondary markets to buy and sell private market stock may be of interest to many private company shareholders, like employees. Shareholders who contact us often want to understand the pros and the cons of selling. In this video, EquityZen Co-Founder Phil Haslett speaks to how pre-IPO selling may be used to fund a stock options exercise, helping employees and other shareholders to more easily navigate the process of selling their shares.
By selling shares before a company goes public, shareholders may access cash without waiting for an IPO.1 Selling stock may provide shareholders with liquidity needs – like funding an education or a home – and diversification2 – so the majority of their wealth isn’t tied to one company. This flexibility maybe particularly beneficial for employees who may have invested significant time and effort into the company, but find themselves in need of funds for personal projects or emergencies.
Private companies that allow their employees to sell their stock use this market as a means to retain and support their committed and long-tenured employees with their liquidity needs. Understanding these dynamics may empower employees and investors alike to make informed decisions about their financial futures.
Interested in learning more about pre-IPO selling? Explore these blog posts:
Benefits of Pre-IPO Liquidity for Employees: What to Know
Selling Shares on EquityZen: A Guide to Creating a Sales Inquiry
What Shareholders + Private Companies Need to Know to Navigate the Market
Learn more about the EquityZen Shareholder process here: https://equityzen.com/shareholder/
Interested in browsing the private company investment opportunities available on EquityZen's marketplace?
Footnotes
- Not all pre-IPO companies will go public or be acquired, and not all IPOs or acquisitions are or will become successful investments. There are inherent risks in pre-IPO investments, including the risk of loss of the entire investment, illiquidity, and fluctuations in value and returns. Investors must be able to afford the loss of their entire investment.
- Diversification does not assure a profit or protect against market loss.
