---
title: "Secondary Market"
url: "https://mahouse.world/glossary/secondary-market"
type: "glossary term"
topic: "Private markets"
author: "Ihor Vlasov"
reviewed: "2026-09-20"
published: "2026-08-10"
---

# Secondary Market

The secondary market for private companies is where existing shares change hands — an employee or an early investor selling to a fund or a new investor — without the company issuing new shares or raising money. It gives shareholders liquidity years before an exit, and it gives buyers a way into companies that are not raising.

**Also known as:** Secondaries, Secondary sale, Secondary transaction, Direct secondary

## Key facts

- **Used at:** between funding rounds, often alongside one; when employees' options have vested and the exit is years away; when an early fund needs to return capital
- **Forms:** a direct secondary (one holder sells to one buyer), a tender offer (the company organises a sale window for many holders), a fund secondary (an investor sells its stake in a fund)
- **Price:** usually a discount to the last round — 10–40% is typical — because the shares are ordinary, illiquid and carry no preference
- **Company consent:** almost always required; transfer restrictions, rights of first refusal and co-sale rights sit in every set of articles
- **In fintech:** the largest private companies have run tender offers to keep staff; secondaries platforms now list stakes in hundreds of them

## How the secondary market works in practice

A fintech raised its Series C four years ago at a valuation that made its early employees paper-rich, and there is no exit in sight. The employees have vested options, mortgages and children; the seed fund that invested nine years ago has a fund life to close. Neither can sell to the public, so they sell privately. A buyer — a secondaries fund, a family office, a later-round investor topping up — agrees a price per share, the company's board consents (or exercises its right of first refusal and buys the shares itself), and the shares transfer.

The price is the interesting part. The last round set a price for preferred shares with a liquidation preference and information rights; the seller is offering ordinary shares with neither, in a company that may not exit for five years. The discount reflects that: 20–30% below the last round is common, more if the round was long ago or the company has slowed, less if a new round is imminent. A discount that is too small to matter is a sign the last round's valuation was not one anybody believes.

Companies have learned to organise it. A tender offer — the company invites all eligible holders to sell a capped amount to a buyer it has lined up, at a price it has negotiated, in a window it controls — keeps the cap table tidy, treats employees equally, and turns a series of awkward one-off requests into an event. Several of the largest private fintechs now run one every year or two, and the price set in it becomes the reference for the option grants that follow.

## Example

A payments company last raised at a €2bn valuation, €18 per preferred share. It runs an employee tender: a growth fund buys up to €60m of ordinary shares at €13.50 — a 25% discount — from any employee whose options have vested for more than two years, capped at 20% of each person's holding. 410 employees sell €48m of shares; the company exercises no right of first refusal; the fund's stake is 2.4% post-tender. The €13.50 becomes the strike price for the next year's option grants, and the seed fund, which sold €10m in the same window, closes its fund.

## Common mistakes

- Assuming shares can be sold: the articles almost always say otherwise until the company agrees.
- Pricing ordinary shares at the preferred round's price, and finding no buyer.
- Employees selling without tax advice, which in most countries treats the gain as income or as a capital gain depending on details they did not check.
- A company that refuses every secondary and then loses the staff whose only liquidity was leaving.
- Buyers who take a stake without information rights, and learn about the down round from the press.

## Related terms

- [Liquidation Preference](https://mahouse.world/glossary/liquidation-preference.md)
- [Private Equity](https://mahouse.world/glossary/private-equity.md)
- [Equity Value](https://mahouse.world/glossary/equity-value.md)
- [Term Sheet](https://mahouse.world/glossary/term-sheet.md)
- [Down Round](https://mahouse.world/glossary/down-round.md)
- [Initial Public Offering](https://mahouse.world/glossary/initial-public-offering.md)

— Ihor Vlasov, M&A FinTech Expert. Last reviewed 2026-09-20. https://mahouse.world/authors/ihor-vlasov