Secondary markets explained

You might’ve heard the term “secondary market” thrown around in startup circles, or maybe someone mentioned selling their shares in a private company, and you thought – hang on, can you even do that in the UK?

Yes, you can. And this guide is here to walk you through the how, why, and what-nexts of private secondaries, all in plain English.

We’ll cover everything from the basics to the brilliant (and slightly bureaucratic) PISCES initiative that could change the game for UK startups and investors alike. Whether you’re a founder, employee, or investor, there’s something here for you.

Contents

1. What is the secondary market (and why should you care)?
2. The markets demystified
3. Secondary markets: behind the surge in popularity
4. The advantages of secondary markets
5. Who’s getting involved?
6. How these deals actually work
7. What’s in it for founders, employees, and investors?
8. Legal stuff (but we’ll keep it simple)
9. Creating liquidity: tender offers vs direct sales
10. What is PISCES?
11. Secondary markets: things to consider
12. Tax implications
13. Summary
14. Jargon-buster
15. FAQs

What is the secondary market? 

The secondary market is where people trade existing shares, or other financial securities to investors. 

OK, so?

More and more founders, employees, and early investors are looking for ways to turn equity into cash, without waiting ten years for an IPO (Initial Public Offering) or acquisition. 

You see where we’re going with this...

The markets demystified

But before we get into it, let’s clarify the differences between the primary market and the secondary market types.

The primary market is where companies issue new shares to raise capital, like during a Series A round or when going public through an IPO.

The secondary market is where those already-issued shares change hands between investors, without the company issuing anything new. And under this umbrella, you have two distinct stalls:

• Public secondary markets – where shares of public companies trade continuously with high liquidity and extensive regulation.
• Private secondary markets – where shares of private companies trade occasionally with more limited liquidity and lighter regulation.

Still with us?

Secondary markets: behind the surge in popularity

Private companies are staying private for longer. That means employees with share options, founders with equity, and early investors are often sitting on value they can’t access.

Here’s what’s fuelling the boom:

• Later-stage private companies are more common: With big valuations and healthy revenues.
• Investor interest is evolving: Institutions are hungry for exposure to high-growth private companies.
• As is the investment landscape: Mid-to-late-stage companies are securing fewer (but larger) rounds.
• Expectations are changing: Employees, in particular, increasingly want to unlock the value of their shares or options sooner.

The UK demand for secondaries grows, as more people seek flexibility in how and when they realise value, and businesses are looking beyond the beaten path to IPO.

Take Moneybox, the popular financial app. In 2024, they ran a “secondary share sale”, which allowed two major new investors to have a stake while its previous investors sold up to 10% of their holdings.

We’re in a world where many companies want to stay private for longer. Being listed on a public market presents increased cost and ongoing reporting burdens versus the benefit. But shareholders still want liquidity.

- Karen Kerrigan, COO of Moneybox.

The advantages of secondary markets

Here are four benefits off the bat:

• Liquidity: Founders and employees can finally take some chips off the table.
• Realistic valuation: Secondary transactions can help validate company worth outside a formal fundraising round.
• Talent retention: Offering staff a path to liquidity makes equity more than a hypothetical benefit.
• Efficient capital flow: Early backers can exit and reinvest in new ventures, keeping the ecosystem vibrant.

It’s not just a financial mechanism – it’s going to shape the UK startup ecosystem.

Who’s getting involved?

It’s not just institutional investors anymore. Many groups can use secondary markets:

• Founders: Want some financial breathing room before a potential exit.
• Employees: Keen to cash in their shares, options or RSUs.
• Angels and seed investors: Hoping to profit sooner or reduce exposure in maturing portfolios.
• Late-stage investors: See secondaries as a strategic entry point, allowing them to buy shares without diluting the company.
• Platforms: Tools like Infinitx, which facilitate secondary transactions in line with UK company law.

And now, with PISCES in the pipeline, expect more participants to want in (more on that later).

How these deals actually work

So, how do secondary sales work? It’s not as simple as clicking "sell" – but it’s becoming easier. Here’s a typical process:

1. Company approval: Usually required under the Articles of Association or shareholder agreement.
2. Valuation discussion: A valuation based on the latest funding round, revenue multiples, or mutual agreement.
3. Matching buyers and sellers: Can be done via platforms, internal marketplaces, or existing investors.
4. Legal process: Drafting and signing a Share Purchase Agreement (SPA).
5. Registry update: Inform Companies House and update the cap table.
6. Tax & reporting: Capital Gains Tax (CGT) may apply, and HMRC needs to be informed.

The process takes coordination, but when done right, can unlock real value.

What’s in it for founders, employees, and investors?

Here's how different groups can benefit from secondary markets:

Founders

1. Access partial liquidity without selling the whole business

Founders can sell a portion of their shares while still staying fully committed to growing the company – no need to wait for a full-blown exit. The best of both worlds, if you will.

2. Personal financial planning

Access to some cash makes it easier to buy a home, support a family, start another venture or just sleep better at night, without needing to take money out of the company itself, which is fair (many founders don't take a salary in the early years).

3. Avoid being "equity rich and cash poor"

Founders often hold a lot of theoretical value on paper. Secondaries turn some of that into real money, which can reduce financial stress and help avoid burnout.

Employees

1. Turn share options into tangible rewards sooner

If the timeline to an exit is hazy or the company isn’t even sure it wants to go down that road, a secondary sale lets employees cash in some of their vested options.

2. Increase trust in long-term equity incentives

When employees see that equity can lead to cash in the bank before an exit, they may find the scheme more meaningful and motivating.

3. Reduce pressure to push for premature exits

Some might argue that with the opportunity to cash out pre-exit, teams are less likely to chase quick sales and more likely to focus on sustainable growth.

Investors

1. Manage the fund lifecycle more effectively

So most institutional investors – like VCs at big firms – operate on a 7-10 year cycle. They invest early, then aim to return capital to their limited partners (LPs) before the fund closes.

Secondary markets give them a way to monetise their investment earlier, without waiting for an IPO or acquisition. That helps manage timelines and improve IRR (Internal Rate of Return) – a key metric.

2. Free up cash to reinvest elsewhere

By selling a portion of their stake in a company, investors can unlock capital to deploy elsewhere, whether that’s doubling down on top-performing portfolio companies or backing new ones. It’s about optionality without a full exit.

3. De-risk while still backing the business

Secondary sales let investors take some money off the table and reduce exposure, while still keeping skin in the game and participating in future upside. It’s a way to balance risk and reward as companies mature.

4. Demonstrate performance 

LPs care about more than just paper valuations. Secondaries let funds highlight real, tangible returns – helping with reporting and making it easier to raise the next fund.

Secondary markets: legal

Here’s the legal lowdown in UK terms:

• Transfers must comply with the Companies Act 2006.
• Articles of Association often dictate the rules.
• Shareholder agreements can add extra steps (like ROFRs or drag-along rights).
• Platform-based sales may require extra due diligence, KYC/AML, and approvals.

Top tip: Seek legal advice to be on the safe side. 

Right of first refusal (ROFR)

A right of first refusal (often found in shareholder agreements) means existing investors or shareholders get the first shot at buying your shares before you sell them to someone else.

Sounds fair, right? It is up to a point. ROFRs can delay or complicate secondary sales, especially if the existing shareholders decline at the last minute. Timing, pricing, and consent all come into play. It’s something to plan for early in the process if you’re thinking about selling.

Creating liquidity

When it comes to actually creating liquidity in a private company, there are two main routes: tender offers and direct secondary sales. Both get the job done, but they work in different ways and suit different situations.

Tender offers

A tender offer is a coordinated process where a company (or an external buyer, like a VC or private equity fund) offers to buy shares from multiple shareholders – usually at a fixed price, during a set window of time.

This method is particularly useful when:

• You want to give a large number of employees or early investors the chance to sell
• The company is going through a new funding round and wants to tidy up the cap table
• There’s appetite from institutional investors to buy in at scale

For example, a high-growth UK scaleup might raise a Series C and simultaneously run a tender offer to give early investors an exit route and reward employees with real cash.

So while the Series C round involves the primary market and a tender offer is a secondary market activity, both can happen in the same fundraising window.

Think of a tender offer as a one-to-many transaction. The terms are set in advance, and everyone who meets the criteria can participate.

Direct secondary sales

This is the more bespoke route. A single shareholder (or a few) sells shares directly to a willing buyer. It’s a private negotiation: you agree on price, timing, and terms individually.

Direct secondaries work well when:

• A founder or early employee wants partial liquidity
• An angel investor is ready to exit
• There’s a known buyer – often an existing investor or strategic partner

It’s more flexible than a tender offer, but it can be slower and more admin-heavy, especially if legal approvals or ROFRs are involved.

In short:

• Tender offers = planned, scalable, and company-led
• Direct secondaries = flexible, one-to-one, and negotiable

Both routes are valid. The right one depends on your stage, goals, and who’s at the table.

What is PISCES?

Let’s decode it: Private Intermittent Securities and Capital Exchange System.

PISCES is the UK government’s big move to make private share trading more formal, frequent, and fair, without pushing companies to go public prematurely.

What PISCES offers:

• Scheduled trading windows: think quarterly auctions, where buyers and sellers transact.
• Eligibility filters: focussed on institutional investors, high net worth individuals and employees.
• Lighter disclosure regime: key info only, no need for full prospectuses.
• Regulatory sandbox: the Financial Conduct Authority’s testbed for innovation.
• Tax efficiency: no Stamp Duty or Stamp Duty Reserve Tax – saving money.

The goal? Give UK startups a middle ground between staying private forever and going public too soon.

Secondary markets: things to consider

As with everything, there are no guarantees. A few potential risks to consider before dipping your toes in secondary markets:

• Illiquidity: Even with platforms, buyers aren’t always lined up.
• Valuation friction: With no market price, agreeing a fair deal takes negotiation.
• Compliance burden: Regulatory hoops and platform requirements can slow things down.
• Disclosure limitations: Private companies don’t share as much info as public ones.

But the benefits often outweigh the challenges, especially if you’re clear-eyed and well-prepared.

Don’t forget about tax

Private share sales often trigger CGT. Here’s what you should know:

1. Business Asset Disposal Relief: Formerly Entrepreneurs’ Relief – may reduce CGT to 14% – in some cases.
2. EMI shares: May have preferential treatment if held for at least two years.
3. Reporting to HMRC: Required, especially if gains exceed the annual exemption threshold.

Top tip: speak to a qualified accountant or tax adviser before finalising any deal.

Secondary markets: recap

The UK secondary market – especially the private secondary space – is on the rise. Founders, employees, and investors finally have more options when it comes to unlocking the value of equity.

Initiatives like PISCES are creating infrastructure that could transform the market, making it more liquid, regulated, and accessible. And as more platforms emerge, we’re entering a golden era for private secondaries.

So whether you’re a founder thinking about your next move, an employee looking to realise your options, or an investor planning an early exit – there’s never been a better time to explore the UK’s growing secondary market.

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Our team, content and app can help you make informed decisions. However, any guidance and support should not be considered as 'legal, tax or financial advice.'

Jargon-buster 

We threw a lot of information at you there! This glossary might help:

• Drag-along rights: If the majority of shareholders want to sell the company, they can require minority shareholders to sell too.
• EMI scheme: A UK-approved employee share option plan with tax perks.
• Exit: A plan executed by an investor or business owner to liquidate assets and move on. For example, an acquisition or IPO.
• GP (General Partner): The people or firm that manage a venture capital or private equity fund. They make the investment decisions and look after the day-to-day running of the fund.
• IPO (Initial Public Offering): When a private company lists its shares on a public stock exchange for the first time, allowing the general public to invest. 
• IRR (Internal Rate of Return): A way investors measure how well an investment or fund is performing over time. The higher the IRR, the more efficiently the fund is turning money into returns.
• Liquidity: How easily you can turn an asset (like shares) into cash.
• Liquidity event: When equity turns into cash – like an IPO, acquisition, or secondary sale.
• LP: Limited Partner - someone who invests money into a venture capital or private equity fund but doesn’t manage it day to day.
• PISCES: A UK government-backed initiative for private share trading.
• Primary market: Where new shares are issued to raise capital.
• ROFR: Right of First Refusal – a clause that can limit who you sell shares to.
• RSU (Restricted Stock Unit): A promise to give someone shares in the future – usually after they’ve stayed at the company for a certain period.
• Secondary market: Where existing shares are traded between investors.
• SPA: Share Purchase Agreement, the legal contract that seals the deal.
• Tag-along rights: If a majority shareholder sells their shares, smaller shareholders can choose to sell theirs too, on the same terms.