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Secondary Sale Calculator

Estimate what you take home from selling private company shares, the valuation the price implies, and your gain over cost basis.

Inputs

Reset

Shares you are selling

What you paid for these shares

Price

Price the discount applies to

For the implied valuation

Negative for a premium

Broker or platform, of gross

Results

Net proceeds

15.00x your cost

$375,000

50,000 shares at $7.5000, a 25.0% discount to $10.0000

Sale price per share
$7.5000
Reference $10.0000
Implied valuation
$150,000,000
vs $200M at the reference price
Gain
$350,000
On a $25,000 cost basis ($0.5000 per share)
Gross proceeds
$375,000
No fees entered
Cost of the discount
$125,000
Value given up vs the reference price
Stake sold
0.250%
Of 20,000,000 fully diluted shares

For education only. Not tax, legal or investment advice.

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The math

How a secondary prices

A secondary sale is a sale of existing shares to another investor, so the money goes to you rather than the company. The price is usually quoted as a discount to the last preferred round.

  1. Set the reference price. Use the last preferred price per share, or a valuation divided by the fully diluted share count.
  2. Apply the discount. The sale price is the reference price minus the discount (or plus a premium).
  3. Take off fees. Broker and platform fees come out of the gross proceeds.
  4. Compare with your cost. Net proceeds minus cost basis is your pre-tax gain. The sale price times the fully diluted shares is the valuation the buyer is implicitly paying.
Sale price        = reference price x (1 - discount)
Gross proceeds    = shares x sale price
Net proceeds      = gross proceeds - fees
Gain              = net proceeds - cost basis
Implied valuation = sale price x fully diluted shares

Assumptions and simplifications

  • Pre-tax. No federal or state tax, holding period, AMT or QSBS treatment.
  • Fees are a single percent of gross proceeds; flat fees and legal costs are not modeled.
  • Exercise costs for options are not added; include them in your cost basis if you exercise to sell.

Worked example

50,000 shares at a 25% discount to $10

Sale price
$10.0000 x 75% = $7.5000
Gross proceeds
50,000 x $7.5000 = $375,000
Gain
$375,000 - $25,000 = $350,000 (15.00x)
Implied valuation
$7.5000 x 20,000,000 = $150,000,000
Net proceeds$375,000

Further reading

Frequently Asked Questions

Common questions about the Secondary Sale calculator and the math behind it.

Why do secondary sales happen at a discount?

Buyers usually get common stock, not the preferred stock the last round sold, so they get no liquidation preference or other preferred rights. They also take on limited information, transfer restrictions and an uncertain exit date. Discounts to the last preferred price vary widely with the company and the market; enter the one in your offer.

What is the implied valuation of a secondary?

The sale price per share times the company’s fully diluted share count. It is a quick read of what the buyer is paying for the whole company, and is often well below the headline valuation of the last round.

How is the gain calculated?

Net proceeds (gross proceeds minus fees) minus your cost basis in the shares sold. For exercised options, basis is generally the exercise price plus any amount taxed as income at exercise; ask a tax advisor for your situation.

Can I sell my startup shares whenever I want?

Usually not freely. Most private companies have a right of first refusal, transfer restrictions and board approval requirements in their bylaws or stock agreements, and many only allow sales in a company-run tender offer. Read your stock agreements before you negotiate.

Does this calculate my taxes?

No. Taxes depend on how long you held the shares, whether they were options, RSUs or purchased stock, whether QSBS applies, and your state. The QSBS calculator estimates the federal Section 1202 exclusion if your shares might qualify.

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