VC & PE Glossary
What Is Secondary Sale?
Updated
Definition
A secondary sale is any transaction where an existing owner sells private securities to another party — the company does not issue new shares and may not receive the proceeds.
Useful for: Founders, Investors
A secondary sale transfers existing private shares from one holder to another — distinct from a primary round where the company sells new stock and receives capital.
How it works
Seller and buyer agree on price, often anchored to the last round or a tender offer clearing price. The board and existing investors may exercise ROFR or co-sale rights. Legal docs include stock purchase agreements and updated cap table records.
Secondary sales appear in tender offers, structured programs, one-off founder liquidity, and LP transfers of fund interests (a related but separate market). Company involvement ranges from full facilitation to arms-length approval only.
Primary + secondary combinations are common: new money funds growth while a secondary tranche buys out early employees or angels.
Why it matters
- Founders: Secondary sales can fund personal obligations without forcing a down-round primary. Coordinate with lead investors to avoid surprise.
- Investors: Track secondary volume relative to primary size. Heavy insider selling at a discount may prompt questions about forward guidance and exit timing.
Common mistake
Calling any investor check a “round” when part or all of the capital only buys existing shares — headline “raised $100M” may include substantial secondary.
Related ideas
- Secondary direct
- Secondaries
- Primary vs secondary in term sheets
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Common questions
Short answers for founders, LPs, and operators