How and why isn’t there much liquidity in private company stocks?

Question

I heard private companies go public to increase liquidity for a company’s stock. But what’s wrong with the liquidity in private companies?

In: 1

Answer 1

There’s no mechanism to buy/sell easily… that’s the primary reason for going public. Buying and selling private shares is more like buying/selling a house, where you have to negotiate a value and terms of sale, etc. It takes longer, it’s a one-off transaction where sides require lawyers, due diligence periods, and such which adds to the costs.

Answer 2

There’s no mechanism to buy/sell easily… that’s the primary reason for going public. Buying and selling private shares is more like buying/selling a house, where you have to negotiate a value and terms of sale, etc. It takes longer, it’s a one-off transaction where sides require lawyers, due diligence periods, and such which adds to the costs.