What is a liquidity event?

A liquidity event refers to an occurrence that enables investors to convert their investments into cash, typically through activities such as a sale of a company, an IPO (Initial Public Offering), or a merger. During these events, investors can realize the value of their investments by selling their stakes in a business or receiving cash payouts, thereby increasing their available cash flow. This is crucial for investors seeking to access and utilize the funds that were previously tied up in their investments.

In contrast, the other options fail to capture the essence of a liquidity event. Funds being locked in would imply that there is no accessibility to cash, which is contrary to the purpose of a liquidity event. An occurrence leading to a market crash does not facilitate cash conversion, but rather hinders liquidity as assets lose value. Meanwhile, a situation involving high-value collectibles may involve sale transactions, but it does not directly align with the broader financial context of a liquidity event in investment settings.