Exits & Liquidity
Direct Secondary
A transaction where company shares are sold directly between parties rather than through a company-sponsored event.
A direct secondary occurs when a shareholder (founder, employee, or early investor) sells their shares directly to a buyer without company involvement. Unlike company-sponsored tender offers, direct secondaries are individually negotiated. They're subject to company transfer restrictions (ROFR, board approval) and often transact at discounts to the last primary round price due to information asymmetry and illiquidity.
In Practice
An early employee sells $500K worth of vested shares to a secondary fund at a 20% discount to the last round price, after obtaining board approval and navigating the company's ROFR process.
Why It Matters
Direct secondaries provide crucial liquidity for founders and employees at companies that stay private for extended periods, but pricing dynamics and transfer restrictions add complexity.
Related Concepts
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