When a portfolio company in a fund or SPV goes public, shares received by the fund as part of the exit are often restricted or subject to lock-up periods, which prevent immediate transfer or sale. Once these restrictions are lifted, the fund lead decides when to distribute proceeds to LPs and whether to distribute all proceeds in cash or offer LPs the option to receive the shares in-kind.
If the fund lead opts to offer an in-kind distribution, LPs are notified via email and must log into their AngelList portfolio dashboard to make their election. The election process takes place on the AngelList platform, where LPs can choose between two options: receiving cash from the liquidated shares or taking ownership of the shares in-kind. Those who choose the in-kind option must submit brokerage account details registered under the name of their investing entity to ensure the shares can be transferred accurately and securely. LPs must complete their election within the specified timeframe, as missing the deadline may result in an automatic default to cash distribution, depending on the GP’s policy.
Once elections are collected, AngelList coordinates with the fund lead to finalize distributions and initiate transfers. LPs should carefully consider several factors before making their election. Receiving shares in-kind may carry different tax implications compared to a cash distribution, so consulting with a tax advisor is recommended. Additionally, LPs opting for shares in-kind must ensure their brokerage account is active, properly set up under their investing entity, and capable of receiving shares. Market conditions can also influence the decision, as share values may fluctuate after the lock-up period ends.
If the receiving broker requires additional information or steps before accepting shares, AngelList (or its broker) will follow up directly with the LP to facilitate the process.
The decision of when to distribute proceeds and whether to liquidate shares or offer an in-kind option ultimately rests with the fund lead. AngelList facilitates the process by providing timely notifications and an efficient platform for LPs to make their elections.