There are several ways an individual may acquire privately held stock in a company, such as being an angel investor, founder or receiving stock through an employee benefits program. However, unlike stock in a publicly traded company, the sale of privately held stock is not as straightforward as calling a broker to facilitate the process. The stock must be sold directly to an accredited buyer and the sale must adhere to the rules and/or policies of the company as well as Securities and Exchange Commission regulations.
1. Ask the company's investor relations manager if there is an active stock buyback program. Some private companies may allow investors and employees who have stock to sell it back. If your company does have a buyback program, you will receive a tender offer for your stock, at which point you can choose to accept or reject the offer.
2. Locate buyers for your private stock. You must find an individual who is willing to purchase your stock and is also an accredited buyer. An accredited buyer is an individual that has a net worth exceeding $1 million and an income of more than $200 thousand dollars, or has a joint income with a spouse of more than $300 thousand and a joint net worth of $1 million or more. In addition to seeking out investors directly, the company where you have your private stock may have a list of qualified people that want to purchase the stock.
3. Go to an attorney who specializes in securities to complete the sale of your private shares to a qualified investor. The lawyer will ensure the necessary paperwork that is required to sell your private stock is filled accurately and in accordance with SEC regulations. For example, the attorney will help to prepare a private placement memorandum that discloses pertinent company information, such as the company's operations and the risks involved with investing in the company for the potential buyer.
4. Sign the paperwork along with the investor to sell your private stock. The attorney will complete the transfer of stock to the new buyer and deposit the money from the sale into your account. Unless you pay the attorney's fees up front, the fees will be deducted from the final amount deposited into your account.
- You can also sell your private stock on an established secondary market website, such as Sharepost and Second Market. These companies facilitate the buying and selling of private stock.
- You must sell your private stock accorrding to the terms of the shareholder agreement.
- Investopedia: How Can I Sell Private Company Stock?
- Investopedia: Accredited Investor
- Investopedia: Buyback
- Venture Beat: Trying to Sell Shares in a Private Startup? Join the Club!
- SV New Tech: Selling Shares of Privately-Held Companies on Secondary Markets
- U.S. Securities and Exchange Commission: Regulation D Offerings
- VC Experts: Private Placement Memorandum