Creating a Win-Win Path to Liquidity in the Secondary Market
The market for private company equity sales, also known as the secondary market, is a way for executives and other employees of private companies to liquidate stock in order to gain access to cash in the near term. Despite being an established market, the information available to buyers and sellers is limited and characterized by a lack of transparency.
Liquidity opportunities require significant due diligence and create considerations applicable to a company’s valuation, accounting, tax, regulatory requirements, legal and human resources. Are you looking to liquidate private company shares?
Take a look at the most important elements to consider on your path to equity.
View PwC’s full report for A Guide to Secondary Transactionshere + Founders Circle’s Guide to Employee Liquidity Programshere
Role of the company in the transaction (purchaser, facilitator, no involvement)
Whether the sale should be counted as a compensation expense for the company
Risk of tainting existing share-based payment plans
Disclosure requirements for a future IPO
Price per share
Price related to the last and next round of institutional financing
The effect of an above-valuation share price on compliance with Section 409A
Potential impacts to future valuations and fair value estimations
Impact on exercise price of future stock options
Implications for employees holding stock
Implications for sellers holding stock options
Other reporting and foreign shareholder considerations
Numerous legal exemptions to the Securities and Exchange Act can be applied
Whether a tender offer has been triggered under the securities laws
Legal disclosures on a Form S-1
Blackout periods for secondary sales
Statutory balance sheet tests limiting the amount of capital a company can use to buy its own shares
Hart-Scott-Rodino antitrust filing
Right of first refusal and right of co-sale restrictions
Impact to employee morale
Maintaining a culture of equality
Founders Circle Capital Disclaimer: The information contained herein is provided for informational and discussion purposes only and is not, and may not be relied on in any manner, as a personal recommendation or as legal, regulatory, tax, accounting, valuation, or investment advice. Neither Founders Circle nor any related person (i) is acting as a fiduciary or financial or investment adviser to you or (ii) is providing any investment advice, opinion or other information in respect of whether any proposed sale of securities is prudent.