Guide
How to Sell Pre-IPO Shares
If you hold equity in a private company: the four exit routes, what blocks each one, and the tax problem that catches people who exercise early.
Most writing in this category addresses buyers. If you hold equity in a private company, you are on the other side of the same market, and the mechanics are considerably less discussed — largely because nobody is paid to explain them to you.
The Four Exits
1. Company tender offer
The company organizes a liquidity event, sets a price, and permits employees to sell a capped portion of vested equity.
Cleanest route available, because there is no consent problem — the company is running it. Canva's August 2025 tender let employees sell up to $3 million in vested equity at a $42 billion valuation. [MAY-26] Stripe has historically set its valuation through tender offers as much as through primary rounds.
The trade-off: you take the price offered. There is no negotiation, the cap is the cap, and the timing is not yours.
2. Secondary sale to an outside buyer
You find a buyer through a marketplace or broker and negotiate a price.
Higher potential price, considerably more friction, and it can be blocked outright. See "What Blocks a Sale" below.
3. Forward contract
You contract to deliver shares or proceeds at a future liquidity event in exchange for cash now. You retain legal ownership, so the transfer restriction is never triggered — which is the entire point of the structure.
In exchange you take on counterparty risk, and typically a substantial discount to current value. The economics vary enormously between providers. Read the documents closely, and specifically establish what happens if the liquidity event never occurs, and what happens if the counterparty fails before it does.
4. Wait
Often correct, and rarely presented as an option by anyone compensated on transaction volume.
What Blocks a Sale
Right of first refusal
The company may match any third-party offer you receive. In practice: you find a buyer, agree terms, submit the notice, and wait to learn whether your deal survives. The company can simply take the shares.
Transfer restrictions
Many stock plans prohibit transfer outright without board consent. Read your plan documents before you spend weeks sourcing a buyer.
Information asymmetry
A buyer of your shares may have access to company financials you do not. You are pricing an asset with less information than the buyer — the reverse of the usual seller's advantage.
Blackout periods
Some companies restrict secondary activity to defined windows, or prohibit it entirely outside a company-run tender.
The Tax Problem Nobody Warns You About
Exercising incentive stock options can trigger alternative minimum tax on the spread between your strike price and the current 409A valuation — in a year when you received no cash.
People have owed six-figure tax bills on paper gains in shares that later became worthless. This is not a rare edge case; it is the most common serious financial mistake in employee equity.
Your 409A valuation is not the preferred share price. It is a separate, generally lower, common-stock appraisal. Confusing the two in either direction causes expensive mistakes — overestimating what your equity is worth, or underestimating your AMT exposure.
Talk to a tax professional before exercising, not after. The planning options largely disappear once the exercise happens.
This is general information, not tax advice.
How private valuations work, including 409ABefore You Sell
- What is the company's most recent 409A, and when was it set?
- What did the last tender price at, and how does your offer compare?
- Does my plan permit transfer, and does the company hold a ROFR?
- What is the notice period, and what happens to my agreement if the company matches?
- Who is the buyer, and is the transaction principal or brokered?
- What are the total fees, including any spread embedded in the price?
- What is the tax treatment of this specific transaction, for me?
- If this is a forward contract: what happens if there is never a liquidity event?