Secondary Sales and Tender Offers

Last updated: 2 November 2026

A secondary sale is where existing stockholders of a private company sell their stock to someone else, and the money goes to the seller rather than to the company. A tender offer is one way this can be organised.

What is a secondary sale?

A secondary stock sale, or “secondary”, is where existing stockholders of a private company sell their stock to someone else. The money goes to the seller, not to the company. That is the basic difference from a primary round, where new money goes to the company. In a private company, this can be the main way an employee, founder or early investor turns paper value into cash before an IPO or acquisition. It does not change the company’s cash position. It changes who owns the shares.

Tender offer vs direct sale

A tender offer is where a company, or an external buyer such as a VC or private equity fund, offers to buy shares from multiple shareholders. It is usually at a fixed price, during a set window of time. It is planned, scalable, and company-led. A direct sale is where one or a few shareholders sell directly to a buyer by private negotiation. It is flexible, one-to-one, and negotiable. The distinction matters because a tender offer can bring many sellers into one process, while a direct sale suits a small number of parties. A buyback is different again: in a buyback the company buys its own shares, while in a secondary a third party buys.

How are secondaries priced?

The investors in the secondary set the price, typically aligned with or discounted from the concurrent primary round. Common stock is often bought at a discount to preferred. The market standard is usually 20%. PostHog let employees sell up to 20% of their vested stock, and eligibility generally means current employees with vested shares. Using the worked example: preferred price £10.00; common at a 20% discount = £8.00. An employee selling 5,000 vested shares receives £40,000. The arithmetic is £10.00 x (1 – 0.20) = £8.00, then £8.00 x 5,000 = £40,000. This is an illustration of how a discount and a sale limit can combine in practice.

Item	Value
Preferred price	£10.00
Common discount	20%
Common price	£8.00
Vested shares sold	5,000
Employee proceeds	£40,000

What approvals apply in the UK?

Board or shareholder approval is usually needed. Restrictions may sit in the articles or shareholders’ agreement, such as rights of first refusal. Transfers must comply with the Companies Act 2006. Amending an EMI or CSOP plan to allow exercise in a secondary, where no such right exists, may inadvertently void tax benefits. Taxable value is generally the amount received for shares sold, not the market value, for UK income tax purposes in the case described. Sellers should check HMRC guidance or take advice before relying on any treatment.

What tax applies?

Vestd notes that Business Asset Disposal Relief may reduce CGT to 14% in certain cases, on a page dated May 2025. EMI shares may get preferential treatment if held at least two years. Rates changed on 6 April 2026, so readers should check current HMRC guidance or take advice. PISCES transactions avoid Stamp Duty or SDRT per Vestd. This is not tax advice, and the position depends on the facts, the share type and the seller’s circumstances.

What is PISCES?

PISCES is the “Private Intermittent Securities Capital Exchange System”: a regulated, semi-liquid market for private securities enabling structured, intermittent secondaries, with settlement via Euroclear. Burges Salmon says UK employee liquidity lags the US and HMRC has issued guidance on PISCES with EMI and CSOP. In other words, PISCES is one route by which private company shares may be traded in a more structured way than a one-off direct sale, while remaining private.

Founder checklist (ours)

A practical checklist for founders includes: who sets the price, how much can be sold, who is eligible, tax treatment of each seller, investor consent and ROFR waivers. These points pull together the earlier sections. Price may be set by investors and aligned with or discounted from a primary round. Limits may mirror the PostHog example of up to 20% of vested stock. Eligibility may be tied to current employees with vested shares. Tax treatment may depend on EMI, CSOP, BADR, holding periods and whether plan amendments are needed. Approvals may involve the board, shareholders, rights of first refusal and the Companies Act 2006. Sellers should check HMRC guidance or take advice.

Frequently asked questions

What is the difference between a secondary sale and a buyback?

In a secondary, a third party buys the shares. In a buyback, the company buys its own shares. The money still goes to the seller in both cases, but the buyer is different.

Who sets the price in a secondary sale?

The investors in the secondary set the price. It is typically aligned with or discounted from the concurrent primary round, and common stock is often bought at a 20% discount to preferred.

Can employees sell shares in a tender offer?

Yes, employees may be eligible where they are current employees with vested shares. PostHog let employees sell up to 20% of their vested stock, although each company’s own terms will differ.

What approvals are usually needed in the UK?

Board or shareholder approval is usually needed. Restrictions in the articles or shareholders’ agreement, such as rights of first refusal, may apply, and transfers must comply with the Companies Act 2006.

What is PISCES?

PISCES is the Private Intermittent Securities Capital Exchange System. It is a regulated, semi-liquid market for private securities enabling structured, intermittent secondaries, with settlement via Euroclear.

Sources

Figures and prices were checked on 2 November 2026; check the linked sources before relying on them. This article is general information, not tax, legal or investment advice.