An event that could result in either investors or debt holders receiving cash from the company, either through acquisition or a sale of assets resulting from bankruptcy. In either case, preference clauses determine the order of payout to claimants, typically valuing debt holders and preferred shareholders over common stockholders. A liquidation event can also include an IPO or a SPAC whereby the shareholders will be able to sell their shares on the open market (with some limitation to insiders and employees who may be locked in for usually six months).
An event that could result in either investors or debt holders receiving cash from the company, either through acquisition or a sale of assets resulting from bankruptcy. In either case, preference clauses determine the order of payout to claimants, typically valuing debt holders and preferred shareholders over common stockholders. A liquidation event can also include an IPO or a SPAC whereby the shareholders will be able to sell their shares on the open market (with some limitation to insiders and employees who may be locked in for usually six months).
