Buyer for secondary shares

Often yes, but it is rarely as simple as selling public stock. Most private companies restrict transfers through their bylaws or stock agreements, commonly with a right of first refusal that lets the company or investors buy the shares first, and many require board approval for any transfer. Some companies run organized tender offers where employees can sell at a set price. Read your stock and option agreements before approaching buyers, and expect the company to be involved.

A right of first refusal, or ROFR, gives the company, and sometimes its major investors, the right to buy shares a holder wants to sell, on the same terms a third-party buyer offered. The seller agrees a price with a buyer, then notifies the company, which has a set period to match. ROFRs let companies control who ends up on the cap table. They add time to a sale and can make buyers hesitant, since the deal may be taken away at the last step.

Secondary prices are negotiated and often differ from the last round's price. Common stock usually trades at a discount to preferred stock because it lacks the preferences investors hold, and the size of the discount depends on demand for the company, its growth and how long an exit might take. Popular late-stage companies can trade near or even above the last round price, while earlier or struggling companies trade at steep discounts. Recent tender offers and 409A valuations give reference points.

Buyers include dedicated secondaries funds, crossover and growth investors, family offices, existing investors who want more ownership, and individual accredited investors buying through secondary marketplaces or special purpose vehicles. For smaller positions in earlier-stage companies, the most likely buyers are often existing investors or the company itself. Buyers will want to know the share class, any transfer restrictions and whether the company will cooperate.