Information Rights

Information rights are provisions in an investor rights agreement that obligate the company to provide regular financial reporting (often quarterly unaudited and annual audited statements) and sometimes board-level access to qualifying shareholders. They are negotiated rights that attach to specific share classes or investment thresholds, not automatic entitlements.

In private markets, asymmetric information is the rule, not the exception. Most shareholders — including many employees and small investors — receive no regular financial updates. Information rights are a meaningful differentiator for investors who need data to make secondary sale or hold decisions.

Illustrative example: a VC firm holding preferred shares with information rights receives quarterly P&L statements and annual audited financials. An employee holding common shares from an option exercise has no information rights and must rely on company announcements, press releases, and secondary market marks to assess value.

The gotcha: information rights are often "major investor" provisions, kicking in only at investment thresholds (e.g., $500,000 or more). Investors buying small secondary positions typically do not receive information rights, meaning they are operating with less data than the institutional investors they are trading alongside. This information asymmetry is a structural risk of the pre-IPO secondary market.