Liquidity can also provide an investor or company owner an exit strategy, portfolio diversity, and flexibility of asset allocation. Many companies use stock and stock option plans to attract and retain talented employees. It is increasingly common to recruit and compensate executives with a combination of salary and stock. Stock in a public company can be issued as a performance based reward or incentive. This reward could be deemed desirable if the stock has a public market.
Stock can be instrumental in attracting and keeping key personnel.
Also, certain tax advantages are a consideration when issuing stock to an employee. Generally, capital gains taxes are lower than ordinary income taxes. Owners and employees may have specific restrictions relating to the liquidity and sale of the stock. A public offering can create a market for the company's stock. This market can result in liquidity and reward for the company's employees.