Why do employees of startups sometimes sell their shares in the pre-IPO market?
Discussions around the pre-IPO market often bring up another question: why do employees of startups sometimes sell their shares before the company goes public?
In many startups, employees receive shares or stock options as part of their compensation. These shares may increase in value as the company grows, but they usually cannot be easily converted into cash because the company is not yet listed on the stock market.
For some employees, selling a small portion of their shares in the pre-IPO market becomes a way to create liquidity. It allows them to realize part of the value they have earned while still continuing their role in the company.
Another reason is financial planning. Employees may have held these shares for several years, and selling a part of them can help manage personal expenses or reduce risk, especially when the timeline of an IPO is uncertain.
Because of this, transactions involving employee-held shares often become one of the sources through which pre-IPO investors are able to enter the unlisted market.
In your view, should employees hold their shares until the IPO, or does selling a portion earlier make more sense?
