Why is there often a discount on secondary shares?

Secondary shares are typically common stock with no liquidation preference and may have transfer restrictions, prompting investors to negotiate a 10% to 25% discount relative to preferred shares.

Updated: August 2026 • Verified v1.2

Founder Secondary Sale & Equity Dilution Calculator

Finance & MathNew

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Secondary_Price = Primary_Price * (1 - Discount_%); Shares_Sold = Target_Proceeds / Secondary_Price

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Understanding Your Results

Displays primary vs secondary share prices, shares transferred, ownership change %, and estimated capital gains tax liabilities.

Practical Guidance & Next Steps

Secondaries in growth rounds typically price at par with preferred shares or at a modest 10% to 20% discount depending on investor demand.

What is this?

A venture capital financial model that calculates founder secondary stock sales, equity ownership dilution, and net cash proceeds.

How does it work?

1. Enter company valuation, total shares, and founder shares owned. 2. Input target secondary dollar amount and price discount %. 3. Review post-secondary ownership % and estimated net cash after tax.

Why use it?

Helps founders de-risk personal wealth while understanding exact cap table ownership consequences.

Technical Scope & Calculation Limitations

Assumes common shares sold to secondary buyers; does not model complex conversion of common into preferred shares.

Frequently Asked Questions

In a secondary transaction, an existing shareholder (such as a founder or early employee) sells existing shares directly to an investor for personal cash liquidity, unlike primary funding which goes into the company's bank account.

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