Secondary Sale
A secondary sale is the sale of already existing company shares from one owner to another. The company itself receives no money from this, since no new shares are issued — the money goes to the seller.
Companies belong to their owners in the form of shares, meaning fractional units of the company expressed as numbers. There are two ways to acquire these shares. Either a company issues new shares and thereby raises fresh money for itself. Or someone who already owns shares sells them on to another buyer. The second case is called a secondary sale. The money in this case does not flow into the company’s coffers, but into the pocket of the previous owner.
Why founders and employees wait for it
Shares in a young technology company are often worth a great deal on paper. Yet you can neither pay rent nor buy a car with them. As long as the company doesn’t go public or get sold, that wealth stays locked up. Experts call this a lack of liquidity, meaning the inability to convert something into cash. A secondary sale is the usual way to solve this problem before there is an IPO.
This affects not only founders. Many employees in the tech industry receive part of their salary in company shares. If a company stays private for ten years, these people wait ten years for their money. Companies like OpenAI or SpaceX therefore regularly organize so-called tender offers. In these, employees are allowed to sell a limited portion of their shares at a fixed price.
For observers, a secondary sale is also a price tag. It shows what buyers are currently actually willing to pay for a company. In OpenAI’s case, the valuation was set at around 500 billion dollars in late 2025 through this route — without the company itself raising any new capital.
How a share sale works without a stock exchange
At a publicly listed corporation, selling is simple: you click Sell in an app. At a private company, this isn’t possible, because there is no open market. Buyers and sellers must find each other individually and negotiate the price. Usually the company itself organizes the process and sets a time window along with a uniform price.
The company’s consent is decisive. Almost all shareholder agreements state that shares may not be freely transferred. The company wants to control who gets a say in the future. There is often a right of first refusal: the company or its existing investors get first access. Anyone wanting to sell as an employee is therefore dependent on approval from above.
A common misconception is that a secondary sale is a funding round. It is not. In a funding round, new shares are created, the pie gets additional slices, and the company receives money for salaries or data centers. In a secondary sale, existing slices simply change owners. The total number of shares stays the same.
Secondaries in reports about AI companies
In business news, the term currently appears mainly in connection with large AI companies. Anthropic, OpenAI, xAI, and Databricks remain private for a long time despite being worth hundreds of billions. When a new valuation is mentioned there, a secondary sale is often behind it. It’s worth looking closely at whether the company actually received money.
Secondaries are also common in the private equity sector, meaning at investment firms. A fund with a ten-year term must eventually divest its holdings. If no buyer can be found for the entire company, it sells its stake to a specialized secondaries fund. Such funds have developed into their own market worth hundreds of billions of dollars in recent years.
For retail investors, these deals are generally not accessible. There are platforms that broker shares of private companies, but the entry amounts are high and the information is thin. Anyone reading a figure from a secondary sale should understand it as a snapshot. It describes what a few buyers paid in a narrow market.