Secondary transactions are sales of existing private company shares from one shareholder to another, without the company issuing new shares or receiving the proceeds. In 2026, secondaries have become a primary liquidity mechanism for late-stage private companies.

The three main secondary types

1. Tender offer

• Company formally invites existing shareholders to sell shares at a fixed price.
• Often run alongside a priced round (e.g., $100M primary + $200M tender).
• SEC filing requirements apply if thresholds are met.
• Examples in 2026: Stripe, SpaceX, OpenAI, Databricks have all used this.

2. Direct secondary

• One-off negotiated transaction between a seller and buyer.
• Often requires company ROFR approval and cap-table update.
• Price typically at a discount to latest round pricing.

3. Structured secondary / continuation fund

• GP-led deal where a new fund acquires positions from an existing fund.
• Provides LP liquidity while keeping companies in a VC vehicle.
• Increasingly common for late-in-life funds with concentrated winners.

Why secondaries matter in 2026

• Companies stay private longer (median time to IPO is >10 years).
• Employees need liquidity — option exercises, life events, diversification.
• Early investors want DPI — LPs are pressing for distributions.
• Late-stage buyers want access — crossover funds (Tiger, Coatue, DST) use secondaries to enter.

Pricing dynamics

• Secondaries typically price 10–30% below the last primary round.
• Discount reflects illiquidity and lack of primary investor rights.
• In hot markets (e.g., late 2020–2021), secondaries traded flat or above primary.

Key legal and process considerations

• ROFR (Right of First Refusal): Company or other holders have first right to buy shares.
• Co-sale / tag-along: Other holders can participate if a founder sells.
• Information rights: Buyers may have less info access than primary investors.
• Tax: Long-term capital gains if held >1 year (U.S.); ordinary income if structured poorly.

Major secondary platforms and buyers

• Forge Global, EquityZen, Hiive, Nasdaq Private Market.
• Industry Ventures, Greenspring, StepStone Secondary (GP-led).
• Tiger Global, Coatue, General Catalyst often buy secondaries.

Continuation funds (GP-led secondaries)

• What it is: GP creates a new fund to buy positions from an old fund; existing LPs can roll over or cash out.
• Why it’s grown: LPs pressure for DPI; GPs want to keep compounding in winners.
• Concerns: Conflicts of interest; pricing discipline; LP consent requirements.

Practical takeaway

1. Founders: Secondaries let you and early employees realize partial liquidity without forcing an exit.
2. Employees: Understand ROFR and tax implications before signing a secondary.
3. Investors: Secondaries can be a strong risk-adjusted return source — enter at a discount, get proven growth.

Further reading

• Forge Global market data: https://forgeglobal.com/
• Industry Ventures: https://www.industryventures.com/