How to sell your shares in a private company
VC Secondaries
Quickstart
July 18, 2023
Unicorn or VC-backed company employees often receive equity as a portion of compensation, but the market for selling shares in private companies has historically been unpredictable.
If you are an employee of one of these companies, you may be seeking an immediate option to unlock the value of your shares instead of waiting for your company to go public or be acquired. Fortunately, more options are available than ever to help you achieve this, and below, we discuss several ways to sell your startup shares.
Company tender offer
Some private VC-backed companies will offer their employees or other early shareholders an opportunity to sell shares into periodic "tender offers". In this process, a buyer, or the company itself, makes an offer to all shareholders, or some of them, at a single point in time, and usually at a fixed price. The buyer is often someone who is already invested in the company, and/or has a close relationship with the management team.
Benefits
No fees: Your company would facilitate the tender offer directly, meaning there is no need to worry about broker commissions.
Drawbacks
Off-market pricing: Your company and the buyer typically agree upon a prearranged price for the tender offer, but this price may not necessarily reflect the current market value of your shares.
Infrequent: These offers are not regularly scheduled and can occur at unpredictable intervals, often with months or even years in between.
Traditional brokers
Traditional secondary market brokers are currently the most common way for shareholders to sell.
Benefits
Relationship value: Traditional brokers work hard to build relationships with their customers, especially regular buyers.
Drawbacks
Zero market visibility: Brokers don't have to share previous transaction prices or the exact price point of the other party. Some brokers can exploit this lack of transparency by encouraging you to sell below the current market price to earn higher commissions for themselves.
Multiple layers of fees: Brokers often rely on other brokers to access buyers. This leads to multiple layers of fees, slower communication and significant inefficiencies.
Time wasted with the wrong broker: Traditional brokers don't operate in a centralized exchange, so you can't be sure if they have actual buyers for your stock. They might not have the right connections, or worse, they might not even bother working on your sale if they don't think it'll be successful. And all this waiting can cost you valuable time and opportunities.
Technology-enhanced brokerages
Tech-enhanced brokerages like Forge and EquityZen have emerged in recent years. These platforms use their websites as a marketing channel to attract sellers and buyers but operate without a central marketplace in a manner similar to traditional brokers.
Benefits
Professional customer service: These firms usually have more standardized and professional processes than traditional brokers.
Larger networks: Such brokerages usually have a wider network of buyers and sellers for various types of securities compared to traditional brokers.
Drawbacks
Lack of market transparency and centralization: While these firms usually show static information about private stocks on their websites, they don't provide you with real-time market prices or detailed market information, such as other buyers and sellers of the same stock.
No opportunity to negotiate with other side: Since these firms function like traditional brokerages, buyers and sellers cannot negotiate or directly bid to each other on their platforms
Live Marketplaces
Hiive is the first live trading platform for private securities where buyers and sellers can connect and agree on transactions without the involvement of a live broker.
Features
Market transparency and centralization: On Hiive, you can access live data on other sellers and buyers and view historical price charts.
Automation: With Hiive, you can create a listing to sell your stock (like a listing to sell your house). Buyers can then place bids on your listing, and you have the flexibility to accept, counter-offer, or message the buyer to negotiate or ask questions.
Verified counterparties: Hiive verifies all parties involved in transactions by conducting KYC, accreditation, and identity verifications before allowing users to enter.
Professional customer service: While you can complete the transaction process entirely on your own, Hiive also offers the support of a team of market experts who are happy to provide you with the same level of service as a traditional broker whenever you need it.
While every solution has benefits, real-time marketplaces continuously bring more transparency and efficiencies to a historically opaque and complex process. When selling private shares, making the right decision can depend greatly on understanding market pricing. The process can also be a lot more rational with standardized transaction processes and access to your counterparty.
For more information about how to buy or sell private company shares pre-IPO, check out the Hiive platform.
Sell Pre-IPO Shares
Sell your pre-IPO shares of private companies on Hiive, a transparent marketplace for private stock. Skip high brokerage fees, and connect with buyers directly. Our experts are here to help if you need it. Learn more
Sell your sharesPlease read this important legal notice and disclosures
The information presented in this media is provided for your informational purposes only and does not constitute an offer by Hiive to buy or sell, or a solicitation of an offer, or a recommendation, to buy or sell, any security. Hiive is not, by this media, providing financial, business, investment, legal, tax or other professional advice nor should this media be the basis for making any decision that may affect your financial or other interests. This media does not constitute a prediction of future events or performance. This media is not a research report and commentary contained herein should not be considered to be research. The information in this media, some of which may have been obtained from third-party sources, is provided on an “as is” basis. Hiive does not guarantee the accuracy or completeness of information in this media and does not assume any liability for reliance on the information provided herein. © The Hiive Company Limited 2023. All rights reserved. Reproduction prohibited.
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* Investing in private unregistered securities is highly speculative and entails a high degree of risk. These securities are inherently illiquid and there is no guarantee that a market will be available for them. Accordingly, investment in these securities is appropriate only for those investors who can tolerate a high degree of risk, can withstand a total loss of investment, and do not require liquidity of their investment.
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