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Illiquidity discount

Also called: liquidity discount

In one line

The amount knocked off a share's value to reflect that it can't be readily converted into cash.

In plain English

Closely related to DLOM: because private shares tie up your money with no easy exit, buyers pay less for them than for liquid, tradable stock.

If you were explaining it to a 5-year-old

Money you can't get at easily is worth a bit less than cash in your pocket — so a locked-away toy fetches less.

Why it matters when you sell

The illiquidity discount directly lowers what buyers offer in a secondary, so build it into your price expectations.

Related terms

Discount for lack of marketability (DLOM)Minority discountSecondary priceFair market value (FMV)

Put it to use

What's a fair discount?

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Sources

A general market-practice term. See how we define and source the glossary in our methodology. General information, not advice.

Educational information only — not financial, tax or legal advice, and not an offer to buy or sell any security. Definitions are general; your own documents and local law govern your situation. PrivateTechShares is independent and not a broker or marketplace.