Fifth Reason to Go Private: Liquidity

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Oct 9

October 9, 2006

The fifth reason to go or remain private is liquidity.

OK. I'm cheating a bit. Shareholder liquidity is often greater in public companies, but there are more and more ways to get liquidity in private companies.

Private company shareholders can access cash through dividends funded by:

Traditional bank debt
Mezzanine debt
Private equity transactions

Private party transactions with other key employees can also provide limited amounts of liquidity.

Remember, too, public company insiders may be locked up following an IPO, and may be limited under rule 144 as to number of shares that can be sold, and may be limited by insider trading limitations. In other words, insiders in a public company have little more liquidity than shareholders in a private one.

related entries

Life of an Analyst Oct 8, 2007
10 Reasons to Go Private: Summary Nov 14, 2006
10th Reason to Go Private: Golf Nov 13, 2006
9th Reason to Go Private: Strategy Nov 7, 2006
Jim Matheson, Entrepreneur, Congressman Nov 2, 2006

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