Secondary Shares
Secondary shares refer to shares of a company that are sold by existing shareholders, such as insiders, institutional investors, or early backers, in a secondary offering. These shares have already been issued by the company during a primary offering, and the sale of secondary shares does not raise new capital for the company. Instead, the transaction allows existing shareholders to sell part or all of their stakes in the company to new investors.
Example
A founder of a tech startup decides to sell 10% of their holdings in the company, offering secondary shares to new investors after the company has gone public.
Key points
• Shares sold by existing shareholders rather than new shares issued by the company.
• Common in secondary offerings and allows shareholders to exit or reduce their stake.
• Does not raise new capital for the company.
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