SPVs for Secondaries

A secondary SPV is a special purpose vehicle formed to buy existing shares of a private company from a current holder, not newly issued shares from the company. Multiple investors pool into the SPV, and the SPV becomes the single buyer and, typically, the single holder of record for the purchased shares.

That makes a secondary easier to execute, but it does not make restricted shares freely transferable. The hard part is usually not forming the SPV. The hard part is confirming that the seller actually owns transferable securities and getting the company and any rightsholders to let the transfer happen.

An SPV does not eliminate transfer restrictions. It turns many buyers into one buyer.

What is an SPV for secondaries?

An SPV for secondaries is a newly formed legal entity that buys existing equity, or sometimes other existing securities, from a current holder such as an employee, founder, or early investor. Investors put money into the SPV, and the SPV purchases the seller’s position.

The key distinction is where the money goes. In a secondary, the money goes to the seller, not to the company. That is different from a primary investment, where the company issues new securities and receives the cash.

Important practical point: investors in the SPV own interests in the SPV, not the company shares directly. Their economic exposure depends on the SPV documents and the rights attached to the underlying security the SPV bought.

If the company is simultaneously doing something like a repurchase or a coordinated liquidity program, that is a different structure and should be analyzed separately.

Why use an SPV for a secondary?

• One buyer is simpler than 25 buyers. The seller and the company usually prefer one counterparty, one set of transfer documents, and one closing process.
• An SPV lets you aggregate smaller checks into one meaningful purchase. That matters when a seller wants to sell a block large enough to justify the administrative work.
• Transfer approvals are often easier to process for one entity than for many individual buyers.
• The company’s cap table stays cleaner because the SPV is usually one holder of record instead of dozens of new names.
• Post-closing administration is centralized. The SPV can handle investor reporting, tax forms, and later corporate actions in one place.

Cap table simplification is a real benefit, but it is not absolute. Even if the SPV is one holder of record, the company may still want information about the underlying investors for compliance, policy, or internal reporting reasons.

A secondary SPV is mainly an execution tool. It simplifies the buyer side of the deal.

When a secondary SPV makes sense

• You have multiple investors who want exposure to the same seller block.
• The seller wants one buyer and one closing.
• The company may permit a transfer, but does not want many new holders on the cap table.
• The deal is large enough that pooling buyers is worth the legal, compliance, and admin work.
• You want one vehicle to handle future communications and corporate actions after closing.

When a secondary SPV may not make sense

• The shares are not transferable, or company consent is unlikely.
• The seller does not actually hold vested, transferable shares.
• The economics are too small to justify legal, compliance, and administrative costs.
• The investor group wants direct ownership or rights that the SPV structure will not provide.

If the seller cannot sell, the SPV does not fix that problem.

How a secondary SPV works

1. Confirm what the seller actually owns.

   Do not treat “equity” as one thing. Common stock, preferred stock, exercised shares, unexercised options, RSUs, and unvested awards have different transfer rules. In many cases, unexercised options and unsettled RSUs cannot simply be sold as-is.

2. Review the company’s transfer rules.

   This usually means checking the stock plan, grant documents, purchase agreements, ROFR or co-sale provisions, and any consent requirements. What is permitted depends on the company’s documents and the seller’s specific security.

3. Negotiate the deal with the seller.

   Typical issues include price, number of shares, timing, representations, fee allocation, tax handling, and what happens if the company or another party exercises a right of first refusal.

4. Form the SPV and raise commitments.

   The investors subscribe into the SPV, and the SPV collects funds through the agreed transaction process. In the U.S., this step usually involves structuring the SPV’s own offering to fit within a securities law exemption.

5. Close the transfer.

   The seller delivers the shares, the SPV pays the seller, and the company updates its records through counsel, its transfer process, or its cap table provider.

6. Administer the SPV after closing.

   The SPV holds the shares and handles investor communications, tax documents, distributions if any, and later events such as tender offers, conversions, dividends, or an acquisition.

The hard part is usually not the SPV paperwork. It is transferability, approvals, and timing.

Pricing secondary shares: what is real and what is guesswork?

Secondary pricing is negotiated. It is not automatically tied to the last primary round, and there is no universal “standard discount” that reliably applies across companies or market cycles.

Last round price is a reference point, not a rule.

If someone quotes a fixed range like “secondaries usually clear at a 10–30% discount,” treat that as rough market talk, not a dependable rule. The right price depends on the company, the security being sold, the available information, transfer friction, and expected time to liquidity.

What tends to move the price

• Security type and rights. Common stock and preferred stock are not the same asset. Preferred may carry liquidation preferences and other protections that common does not.
• What has changed since the last financing. Revenue growth, burn, runway, product risk, hiring, and market sentiment all matter.
• Information access. If buyers cannot get credible company information, they usually want more margin for risk.
• Transfer restrictions and closing risk. The harder it is to get approval, or the more likely a ROFR gets exercised, the more that uncertainty affects price.
• Liquidity timeline. A theoretical paper valuation matters less when liquidity is uncertain or far away.

Legal and execution issues that commonly slow or kill the deal

This is general information, not legal, tax, or investment advice. Secondary transfers are fact-specific, and experienced counsel should review both the transfer and the SPV structure.

Company consent, ROFR, and other transfer restrictions

Many private-company shares are contractually restricted. Common issues include:

• Company approval requirements for transfers
• Rights of first refusal, where the company and/or existing investors can buy the shares instead
• Co-sale rights, where other holders may have participation rights
• Restrictions in equity plans or grant documents, especially for employee-held equity

Whether these rights apply, and how they apply, depends on the company’s governing documents and the seller’s specific agreements.

What exactly is being sold

The biggest mistake is assuming an employee can sell “their equity” without checking what that means in the documents.

• Vested common stock may be transferable, subject to restrictions and approvals.
• Preferred stock may have different rights and different transfer mechanics.
• Unexercised options often are not transferable without special handling, if at all.
• RSUs generally are not transferable before settlement.
• Unvested awards usually raise separate restrictions and approval issues.

Before you spend time on price or syndication, confirm the exact security and whether it can actually move.

The SPV itself is offering securities

When investors buy interests in the SPV, the SPV is conducting its own securities offering. In the U.S., that offering typically needs to fit within an exemption from registration, often under Regulation D, though the right exemption depends on the facts and structure. Other jurisdictions have their own rules.

This affects who can invest, how the offering can be conducted, and what disclosures are appropriate. Do not treat the SPV as just a paperwork wrapper.

Timing is usually driven by approvals, not drafting

Founders and buyers often underestimate how long it takes to get a company to review a transfer, run a ROFR process, coordinate counsel, and update records. Even straightforward deals can stall if the company is slow or if the documents are unclear.

Do not promise a close date you do not control.

Secondary SPV vs. primary SPV

Feature	Secondary SPV	Primary SPV
What the SPV buys	Existing shares or other existing securities from a current holder	Newly issued shares or other securities from the company
Where the money goes	To the seller, not the company	To the company
Main counterparty	The existing holder selling the position	The company raising capital
Pricing source	Negotiated with the seller; affected by security type, transfer friction, and liquidity timing	Set by the financing terms negotiated with the company
Key diligence question	Is this security transferable, and can the transfer actually close?	Are the financing terms and company fundamentals acceptable?
Typical bottleneck	Consent, ROFR, and transfer processing	Round coordination and financing closing mechanics
Cap table effect	Usually one new holder of record replacing or joining an existing holder	One new holder of record for newly issued securities

A simple decision framework

A secondary SPV usually makes sense when three things are true:

1. There is a real seller with a real, identifiable block.
2. The security is transferable, or at least the company has a clear path to approve the transfer.
3. The deal is large enough that aggregating buyers into one vehicle is worth the setup and ongoing administration.

If any of those three is missing, the SPV is usually a distraction rather than a solution.

Common mistakes

• Assuming the seller has transferable shares when they actually have options, RSUs, or unvested awards.
• Anchoring to the last round price without adjusting for security type, rights, information access, and liquidity timing.
• Waiting too long to review ROFR, co-sale, consent, and stock plan restrictions.
• Treating SPV formation as the hard part and transfer approvals as an afterthought.
• Forgetting that SPV investors own interests in the SPV, not direct shares of the company.
• Underestimating post-close administration, including tax forms, investor updates, and later corporate actions.

Frequently asked questions

Is a secondary SPV investing in the company?

No. In a true secondary, the SPV is buying from an existing holder, and the cash goes to that seller. The company does not receive the proceeds unless there is a separate company transaction happening alongside it.

Can any private-company shares be bought on the secondary market?

No. Many private companies restrict transfers, require company consent, or give the company or existing investors a right of first refusal. Whether a specific block can be sold depends on the company’s documents and the seller’s specific security.

Can employees sell options or RSUs through a secondary SPV?

Usually not as-is. Unexercised options and unsettled RSUs often are not transferable, though the answer depends on the plan documents, the grant terms, and company approval.

Do secondary shares usually trade at a discount to the last round?

Sometimes, but there is no reliable universal discount range. Price depends on the company, the security being sold, information access, transfer restrictions, and market conditions.

How long does a secondary SPV take to close?

It depends, and the critical path is usually approvals. Company consent, ROFR timing, counsel responsiveness, and record updates usually matter more than how quickly the SPV entity can be formed.

Does the company have to approve the sale?

Often yes. Private-company transfers commonly require company consent or are subject to contractual restrictions. The answer is in the governing documents, not in assumptions about what is “normal.”

How does Wefunder handle secondary SPVs?

That depends on the specific transaction and Wefunder’s current SPV program terms. If you are using Wefunder for a secondary SPV, confirm the current structure, fees, and eligibility requirements directly from Wefunder’s latest documentation or team.

Bottom line

A secondary SPV is often the cleanest way to buy a meaningful block of private-company shares without adding a long list of direct buyers to the cap table. It simplifies the buyer side, the paperwork, and the ongoing administration.

But the SPV is not the real risk. Transferability is. If the shares cannot be sold, the company will not approve the transfer, or the economics do not justify the work, the SPV will not rescue the deal.