Secondary Sale
The sale of existing company shares from one shareholder to another, generating no new capital for the company itself.
A secondary sale transfers already-issued shares from an existing shareholder (a founder, employee, or early investor) to a new buyer, as opposed to a primary sale where the company issues brand-new shares in exchange for capital that goes onto its own balance sheet. Secondaries give shareholders liquidity — cash in hand — without requiring the company itself to raise or spend money.
Secondaries can happen individually (a single founder or employee selling some shares to an interested investor) or as an organized company-facilitated tender offer covering many shareholders at once, and they're typically subject to a right of first refusal and tag-along/drag-along provisions that give the company and other investors some control over who ends up owning shares.
Founders and early employees should consider a modest, well-timed secondary sale at a growth-stage round to reduce personal financial risk — taking some chips off the table doesn't have to signal a lack of conviction, and it can actually reduce pressure to force a premature company-level exit.
Does a secondary sale bring new money into the company?
No — the cash goes directly to the selling shareholder, not the company's balance sheet, since existing shares are simply changing hands rather than new shares being issued.
Related terms
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