Secondary Market (Private Shares)
Definition
A marketplace where existing shareholders in private companies — typically employees, early investors, or founders — can sell their ownership stakes to new buyers before an IPO or trade sale. Secondary markets for private shares have grown significantly, with platforms such as Forge Global and Nasdaq Private Market facilitating transactions that provide liquidity and price discovery for otherwise illiquid private company equity.
Complementary Terms
Concepts that frequently appear alongside Secondary Market (Private Shares) in practice.
A transaction in which existing shareholders sell their equity to new investors rather than the company issuing new shares. Secondary sales provide liquidity to founders and early investors without diluting other shareholders or changing the company's capitalisation.
Modifications applied to valuation multiples derived from comparable public companies or precedent transactions to account for differences between the reference companies and the subject being valued. Common adjustments address differences in size, growth rate, profitability, geographic mix, capital structure, and the presence or absence of a control premium.
The total revenue opportunity available for a product or service if it achieved 100% market share. TAM represents the theoretical maximum market size and is used by investors to assess the scale of opportunity and the potential ceiling for a company's growth.
A private equity transaction in which one PE fund sells a portfolio company to another PE fund, rather than to a strategic buyer or through an IPO. Secondary buyouts have become the most common PE exit route, accounting for over 50% of European PE exits in recent years.
A valuation methodology that estimates the value of an asset based on observed prices in actual market transactions involving comparable assets. The market approach is used to value intangible assets when reliable transaction data or licensing royalty rates are available, and is one of the three primary approaches alongside the income and cost approaches.
The price at which an asset would change hands between a willing buyer and a willing seller, neither being under compulsion to transact, and both having reasonable knowledge of the relevant facts. Fair market value is the standard used in most asset valuation contexts.
The portion of the total addressable market that a company can realistically serve given its current product, business model, and geographic reach. SAM is a more practical measure of near-term opportunity than TAM.
The reduction in existing shareholders' ownership percentage when a company issues new shares, typically during a fundraising round. Dilution is an expected part of growth financing, but founders and early investors monitor it closely to protect their economic interest.
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