Legal Question in Investment Law in California

Re: can a shareholder of a private company cash in shares

If you purchased stock, you own stock. Your options are limited to selling the stock to a willing buyer, if you can find one, and if the shares are transferable, for whatever that buyer is willing to pay. Small company stock that is pre-IPO is usually not freely transferable. The share certificates should bear a legend disclosing the general nature of the restrictions. Despite the restrictions, there is usually a legal way to arrange a sale if the shares have value.

On the other hand, if your purchase of the shares was induced by fraud or misrepresentation, or if the sale otherwise violated the securities laws in any way, you may be able to rescind (cancel) the sale and recover your investment plus other damages.

A broker's statement about IPO plans is probably not fraud, but if it was a major part of a sales campaign made without offsetting disclaimers or warnings, it MIGHT be fraudulent or evidence of fraud. A securities lawyer could give you a better reading after looking at the documents reflecting your purchases and the company's and broker's disclosures, prospectuses, etc.

One must also question what kind of broker was selling non-registered, pre-IPO shares, and what securities registration exemption was relied upon in the sale to you. Securities firms and brokers generally can't touch unregistered (pre-IPO) shares. There may be a violation here.