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.
