With the mean time from funding to exit for a startup increasing from 2 - 5 years in the early 2000s to an average of 6 - 10 years today, an employee may
hold illiquid stock for quite some time while undergoing major life events such as marriage, birth of a child, home purchase, or graduate education.
Not exact matches
Given the absence of a public trading market of our common
stock, and in accordance with the American Institute of Certified Public Accountants Accounting and Valuation Guide, Valuation of Privately -
Held Company Equity Securities Issued as Compensation, our board of directors exercised reasonable judgment and considered numerous and subjective factors to determine the best estimate of fair value of our common
stock, including independent third - party valuations of our common
stock; the prices at which we sold shares of our convertible preferred
stock to outside investors in arms - length transactions; the rights, preferences, and privileges of our convertible preferred
stock relative to those of our common
stock; our operating results, financial position, and capital resources; current business conditions and projections; the lack of marketability of our common
stock; the hiring of key personnel and the experience of our management; the introduction of new products; our stage of development and material risks related to our business; the fact that the option grants involve
illiquid securities in a private company; the likelihood of achieving a liquidity event, such as an initial public offering or a sale of our company given the prevailing market conditions and the nature and history of our business; industry trends and competitive environment; trends in consumer spending, including consumer confidence; and overall economic indicators, including gross domestic product, employment, inflation and interest rates, and the general economic outlook.
Additionally, investors may receive
illiquid and / or restricted
stock that may be subject to
holding period requirements and / or liquidity concerns.
1: The Fund Manager 2: Skin in the Game 3: Long - term Historical Performance 4: Concentrated
Holdings 5: Low Turnover of
Stocks 6: A Fund that has not Grown too Big, or is too Small /
Illiquid
If
stocks do 10 % going forward and a hedge fund that charges 2 and 20 takes 3 % of your money in fees you've only got 7 % left, plus it's leveraged,
holds illiquid securities, etc..
Now, it's true that I think the undisturbed
stock price of IMS Health (a $ 2 - $ 3 billion, listed, liquid
stock) was not quite as cheap as the undisturbed
stock price of Bancinsurance (a sub $ 50 million market cap, unlisted,
illiquid, and closely
held stock).
Marty Whitman buys in «safe and cheap» small cap
stocks that are
illiquid and
holds them until their value is recognized.
One reason that several of the Fund's
illiquid common
stocks fell during the quarter is that many value managers, who might
hold similar
stocks, saw the opportunity to «upgrade» their portfolios during mid-late September.
While there's not a huge amount to be gained in
holding 99 shares, like the above, it does highlight the inefficiency around many of these smaller, more
illiquid stocks.
(Most bondholders have no desire to
hold equity at all, much less an
illiquid penny
stock, thus the 54 % lockup).