An increasing number of employees of middle and late-stage private companies are seeking liquidity and with good reason. Companies are staying private longer, the lack of liquidity and over-concentration of net worth in a single stock becomes a burden. In most cases, employees move on to other jobs without fully realizing the value of ESOPs allotted to them.

Chart 1 – Companies are staying private longer. Access to capital from venture capital and private equity firms who have longer investment horizons and also bring in strategic benefits are allowing companies to delay going public. However, most of the growth happens before IPO, an event which is now treated as an exit venue for early investors rather than a fundraising event.

Even in the utopian cases where shareholders see an IPO on the horizon, they may prefer to take some money off the table today rather than further delay and rely entirely on the uncertainty of a public market’s perception of the stock and the one year lock in period mandated by SEBI during which they cannot sell their shares. IPO plans of even the hottest companies on earth can fail. Think Uber or WeWork.

For the great majority of shareholders seeking to sell private stock for the first time, the process can be daunting. Selling shareholders must –

For the great majority of shareholders seeking to sell private stock for the first time, the process can be daunting. Selling shareholders must –

  • Analyse limited information to value their shares
  • Source and negotiate with multiple potential buyers
  • Retain or have the legal expertise to comply with securities laws, document the transaction and conform to the issuer’s unique transfer protocols.

Even where a seller has access to these resources, finding the time needed to manage these tasks is a frequent problem.

Below are some points selling shareholders might keep in mind while navigating these challenging waters.

Should you use a broker-advisor like Minance Private Market?

The first decision to make is whether or not to use a broker. My answer will obviously be biased so take it with a pinch of salt. That said, I think that most sellers are materially better off using a broker. Selling private company shares is a lot more like selling a real estate. Few shareholders have the private market expertise, information, network or time to effectively represent themselves. Just as you expect a good real estate agent will more than offset their commission by getting you a better price for your house, assist you with the paperwork, do all the heavy lifting, a private market broker can make an even greater difference when it comes to optimizing your chances to close a sale for full value.

Next you need to understand where the broker expects to find buyers for your shares. Ideally, the firm has previously transacted in your company’s shares. If they haven’t or if they’re vague about the buyers they have in mind for your shares, they may spend months trying to source buyers from a cold start. I believe sellers generally do much better when they leverage an active marketplace that continually connects sellers with many interested buyers. Minance is connected to thousands of buyers via it’s Private Market platform.

Employer rules

Whether or not you work with a broker, the first rule of private market transactions is: respect the company whose shares you are looking to sell. Most private companies are generally sympathetic to their shareholders’ need for liquidity but have very valid concerns about what form that liquidity takes and thus place restrictions on secondary share sales. Understanding those restrictions avoids unnecessary conflict with the company and can save you a great deal of time. There is no point spending weeks on a sale the company will never permit. This is another area where Minance can help you.

What’s the right price of your shares

The next step is to figure out the value of your shares. Unlike listed company shares, it’s a little bit harder to price private stocks, but there are some useful benchmarks. The simplest and most reliable indicator of a company’s enterprise value is its most recent primary financing round. Also relevant might be any valuations disclosed by mutual funds or institutional investors that are already shareholders in the company. Selling shareholders must, however, recognize the differences between classes of stock. Preferred stock comes with liquidation preferences and other rights that make it more valuable than common stock but can almost never be sold

At Minance, we typically will leverage our online platform to identify high-quality investors who have already indicated interest in the shares to be sold.

Contracts, ROFR’s and closing

A stock purchase agreement sets forth the terms of your sale. The issuer receives a copy of that agreement and a summary of the proposed transaction. Many issuers have a unique transfer process selling shareholders must follow. They also frequently want information about proposed buyers to determine their desirability as a shareholder. Best example is PayTM. Finally, almost all shares are subject to a right-of-first-refusal (ROFR), which enables the issuer to replace your buyer. Whether or not the company exercises its ROFR, your sale should usually close within 30-60 days of submitting the transaction to the company.


Compared to most securities transactions, selling private company shares can be a challenging process. The good news is that, over the last few years, such sales have become commonplace and there are now marketplaces like Minance are there to easily facilitate these transactions. The even better news is that the market continues to improve – issuers, shareholders, investors and the platforms that connect them are becoming ever more integrated, more efficient, which leads to less friction and ease of execution.

Anurag Bhatia is CEO & Head of Investments of Minance