Liquidity Event
Any transaction that converts illiquid private-company equity into cash or freely tradable securities, typically IPO, M&A, or secondary tender.
Definition
A liquidity event is any transaction that converts illiquid private-company equity into cash or freely tradable public securities. The three primary forms in MedTech are: an IPO, an acquisition (M&A), or a secondary tender offer in which existing investors (or specialized secondary funds) buy shares from earlier holders. The term often appears in vesting acceleration provisions, board approval covenants, and 409A valuation refresh triggers.What this means in practice
MedTech median time to liquidity is significantly longer than software (commonly 8-12 years from founding) due to clinical-trial and regulatory timelines. Secondary transactions have become more common as a partial-liquidity option for long-tenured founders and employees.- •Assuming a secondary tender qualifies as the 'liquidity event' under double-trigger acceleration clauses, usually it does not.
Related terms
Grouped by themeEditor's picks
· Hand-selected related conceptsValuation ratio applied at exit, e.g., enterprise value to revenue.
First sale of a company's stock to public investors via a registered SEC offering, typically on NYSE or Nasdaq.
Transactions in which one company acquires or combines with another, the dominant MedTech exit path, typically a strategic acquisition by an established player.
Timeline over which equity is earned by an employee or founder.
More in Investment & Finance
· Same categoryAn independent fair-market-value appraisal of common stock used to set tax-compliant strike prices for employee stock options.
Adjustment that protects investors if the company raises a future round at a lower price.
Interim financing between priced rounds, usually convertible.
Rate at which a company spends cash, typically expressed monthly.
Primary references
3 sources- 1
NVCA Model Legal DocumentsVerifiedNVCAnvca.org
- 2
IRS, Topic 427 Stock OptionsVerifiedIRSirs.gov
- 3
Silicon Valley Bank - Healthcare ReportsVerifiedSVBsvb.com
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