Which of the following is a common risk in a public-to-private deal?

• A. Delisting, liquidity constraints, and market mispricing
• B. Excess cash on hand
• C. Unlimited liquidity
• D. Negative synergy

Answer: (A)

Taking a company private primarily introduces liquidity and pricing risks tied to removing it from the public market. When a deal closes and the stock is delisted, there’s no ongoing public exchange to provide price discovery, so trading becomes far less liquid. That makes it harder for existing shareholders to exit at or near the proposed deal price, and any future exit becomes more dependent on private sales or recapitalizations rather than a public market. The combination of delisting, reduced liquidity, and the potential for mispricing arises because the true value of the private company may be unclear in a private setting, with fewer buyers and less information available to the market. These factors are common in public-to-private transactions, whereas excess cash, unlimited liquidity, or negative synergy aren’t typical, inherent risks of the process.