Secondary Market Trading of Private Company Shares

Summary

This practice note discusses the secondary markets for securities of privately held companies. It discusses the evolution of those markets from a marketplace model intended primarily to provide liquidity to employees and other investors to one that focuses primarily on structured, company-controlled liquidity programs largely in response to the desire of these companies to maintain control over sales of their securities and examines the current marketplace and hybrid or ecosystem market models that have been developed as a result. This note also reviews how federal securities laws restrict liquidity of private company securities and the aspects of the federal and state securities laws that apply to secondary market trading in private company securities.