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