Liquidity when the trajectory arrives, not when the clock runs out

The default failure mode of an ISA is illiquidity. The backer commits capital for a decade; the issuer commits income for a decade; neither party can realize value until the clock runs out. That’s a yield product at best, an illiquid single-claim contract at worst. Preflop decouples the two to make the instrument a genuine market asset instead.

The covenant is one thing. The lock is another.

• —Covenant — the legal contract binding the issuer to pay $s_1$ of annual TEB for $T$ years and $s_2$ thereafter. Immutable at issuance. Not renegotiable.
• —Lock— an ERC-20 transfer restriction. Binary state: tokens are either transferrable or they aren’t. Independent of the covenant’s cash-flow obligation.

Why decoupling matters at the market level

Why it matters —The whole return profile argument (see /how-it-works#return-profile) only works if liquidity is reachable before year 10. Early unlock is the mechanism that lets the Phase 2 perpetuity leverage actually translate into realized capital gains for a backer on the breakout trajectory.

Three distinct paths, each with a different bar and process. All three lead to the same on-chain unlock() call.

Term expiration is the one path with no human in the loop. Everything else runs through the review panel with a formal decision and a written record.

This is the primary early-liquidity path. An issuer submits a request; Preflop runs it through seven sequential gates; if all clear, the market opens. No gate can be waived.

1 · Minimum data threshold

Enough on-platform TEB history must exist for the reference price to be ground-truth-anchored, not signal-inferred.

Below the minimum → application is not reviewed. The request can be re-submitted once the threshold is reached.

2 · Reference price modeling

Preflop’s pricing team runs the current forecast through the Obligation Ledger and produces a refreshed $V(t)$ with an updated CI band. This uses the same pipeline as a Direct Listing reference-price calculation — see Stage 2 of the pricing spec. The resulting anchor is what circuit breakers are measured against on day one.

3 · Disclosure pack

• —Refreshed issuer disclosures (current role, any material change in income-producing activity)
• —Updated conviction score breakdown — every signal refreshed, weights unchanged from v2
• —Current cap-ledger summary showing every active obligation under the 25% invariant
• —Attestation: issuer certifies that all material events have been disclosed per the 7-day notifiable rule

4 · Market-maker engagement

A market maker contracts in for the first 90 days post-unlock, committing to two-sided quotes inside the circuit band. This avoids a day-one thin-book cross and ensures the reference price gets a fair test before volatility-based band relaxation kicks in.

5 · Tight circuit breakers on day one

$\pm 20\%$ deviation from the refreshed reference price halts trading. Halts last 10 minutes; a conviction-signal review clears the halt or extends it. Bands loosen as realized volatility establishes itself over the first 30 days. This is the same circuit-breaker model as a Stage-3 first-trade open — the early-unlock pathway intentionally inherits it to keep behavior predictable across listing types.

6 · Insider lockup — 18 months on retained founder allocation

The issuer cannot sell their own tokens for 18 months after the market opens. Rationale:

• —Removes the obvious gaming vector. Without a lockup, an issuer could request early unlock right before a known good quarter to dump their own allocation into a pump.
• —Matches industry norms. Post-IPO insider lockups in traditional public equity are 90–180 days; Preflop’s 18 months reflects that early unlock is a softer proof point than a full IPO — more conservatism is warranted.
• —Applies only to the issuer’s retained founder allocation. Tokens held by external backers are fully transferable from unlock day one.
• —Does not extend. At month 18, the founder allocation unlocks automatically. No review, no extension — predictable by design.

7 · Covenant rate is inviolate

The issuer signed for $s_1 = 3\%$ (or whatever they covenanted) over $T = 10$ years. Early unlock does not renegotiate the share rate, term, equity conversion, or TEB definition. The covenant is the covenant. See the dedicated section below.

This is the credibility hinge of the whole instrument — worth stating plainly and in its own section rather than as a bullet on a longer list.

Why this matters:

• —Backers’ Phase 1 claim is preserved in full. A backer who bought at listing and holds through an early unlock still receives the full remaining Phase 1 dividend stream at the originally covenanted rate, for the originally covenanted years.
• —Issuers can’t use early unlock to renegotiate. An unlock event is not a refinancing event. The covenant is a commercial contract, not a variable-rate instrument.
• —Pricing stays coherent. The reference price revalidation at unlock uses the same $s_1, s_2, T$ as the original covenant — nothing about the instrument’s legal shape changes, so no arbitrary repricing jump at unlock beyond what the trajectory re-forecast implies.

Why it matters —If any part of this were negotiable at early unlock, the whole instrument’s credibility as a long-dated commitment would collapse. Backers would need to model not just TEB trajectory but also the issuer’s future behavior in re-negotiation windows. Inviolability is what makes the token a durable claim.

All three unlock paths converge on the same contract call:

• —Administrator-only — the platform multi-sig has exclusive authority to call unlock(). The issuer cannot self-serve the unlock; the process (see above) is the gatekeeper.
• —Irreversible — once unlocked, the token is permanently transferable. No re-lock path exists in the contract.
• —Event-emitting — the on-chain IPOUnlocked event with block timestamp is the canonical record. All off-chain records (market-maker activation, circuit-breaker enable, insider-lockup counter start) reference it.
• —Triggers market opening — the platform runs an opening cross, the order book opens, circuit breakers at $\pm 20\%$ of the refreshed reference go live.

During lock (for completeness)

• ✓Phase 1 dividends continue. Pro-rata distributions every quarter; lock affects transferability, not cash flow.
• ✓Unrealized P&L is visible. Holder dashboards show the current $V(t)$ from the pricing formula against the current forecast.
• ✓Conviction + TEB reports update live. Holders see the path to unlock in real time.
• —No transfers. Token balances are frozen at initial allocation; the ERC-20 transfer function reverts.
• —No secondary market. The orderbook is closed. The reference price is still computed and displayed.

Early-unlock request rejected (data threshold not met)

Issuer submits an early-unlock request before accumulating the minimum quarterly reports (8 for covenant, 4 for DL). The request is not reviewed; the platform returns a deterministic “threshold not met” response with the exact number of additional quarters required. Re-submission happens automatically on the next quarterly report cycle once the threshold is met.

Early unlock approved but circuit breaker trips on day one

Opening cross clears at $+25\%$ above the refreshed reference (outside the $\pm 20\%$band). Circuit breaker halts trading. A conviction-signal review runs within the 10-minute halt window; if the signals justify the move, the halt clears and trading resumes with the spot price as the new reference. If signals don’t justify it, the halt extends another 10 minutes and the reference is re-validated. Repeated halts over the opening hour trigger a full-day circuit-breaker reset.

Partial funding at term expiration

A covenant funds above 50% but below 100% by the time the term expires. The lock lifts (term-expiration path is unconditional); unsubscribed tokens remain in treasury and can be offered later via a secondary issuance (governance-approved). Most covenants stay 100%-funded before term expiration, making this path rare.

Conviction drift during lock

Conviction updates continuously. For an issuer whose conviction drops below the curation bar during lock, the early-unlock path requires conviction to be at-or-above bar at the time of review. Term expiration is unaffected — the covenant’s cash flow obligation is legal, not conviction-gated.

Deficiency during lock

A missed quarterly report starts the deficiency clock — 30-day cure window, review panel after. Dividends pause during the cure window; the lock persists regardless. If the deficiency resolves, unlock paths resume evaluation. If not, the delisting framework applies and the covenant exits the platform in an orderly wind-down with backer-protection options.