can you trade private stock? Practical guide

Can You Trade Private Stock?

Private stock — shares of companies that are not listed on public exchanges — exists outside the open market most retail investors know. The simple answer to "can you trade private stock" is: yes, you can trade private stock, but trading is more restricted, conditional, and complex than trading public shares. This guide explains what private stock is, who can buy and sell it, where trades happen, the step-by-step process for sellers and buyers, valuation methods, legal and tax considerations, key risks, and practical checklists for employees and investors. It also provides timely market context as of January 2026 and points to Bitget tools that help participants access and manage private-market liquidity.

Note on timing: As of January 16, 2026, major business and policy forums have highlighted growing differences in wealth and market access, which help explain increased interest in private-market liquidity for employees and early investors (source: CNN, Jan 16, 2026). This broader context is relevant to how companies design liquidity programs and how institutional demand shapes secondary pricing.

Overview and key concepts

Understanding private-share trading starts with a few core concepts:

• Private vs. public stock: Private stock refers to equity in companies that do not have securities listed on public exchanges. These shares are typically issued under private financing rounds and are governed by shareholders' agreements, equity plans, and corporate charters. Public stock trades on regulated exchanges with continuous price discovery and broad liquidity.

• Liquidity: Private shares are usually illiquid. Liquidity means how easily an asset can be sold at a transparent price. Private stock trades infrequently and often requires approval steps before transfer, leading to wider bid‑ask spreads and execution uncertainty.

• Secondary market: The secondary market for private shares is where existing shareholders sell to new or existing investors. Secondary transactions provide liquidity without an IPO or public listing.

• Pre‑IPO: Companies approaching an IPO may allow limited secondary trading to provide liquidity to employees and early investors. Pre‑IPO prices are often tied to the most recent financing round, indicative valuations, or negotiated bids.

• Vesting and exercise: Employees frequently hold options or restricted stock units (RSUs). Vesting determines when an employee owns eligible shares or options; exercise is the process of converting vested options into actual shares by paying the strike price (when applicable).

• Transfer restrictions: Many private-company equity instruments carry contractual restrictions — right of first refusal (ROFR), company approval, transfer windows, lockups, and repurchase rights — that affect whether and how shares can be traded.

Can you trade private stock? Yes, but you should expect lower liquidity, more paperwork, approvals, and different pricing mechanics than public markets.

Who can buy and sell private stock

Private-share transactions are typically limited to specific participant categories and often include vetting. The common participants are:

Sellers — employees, founders, early investors

• Employees: Vested employees may want to sell shares to raise cash, diversify equity concentration, or pay tax liabilities triggered by option exercises. However, employees face constraints: many employee shares are unexercised options requiring an exercise payment; exercised shares may be subject to company transfer rules, repurchase rights, and tax consequences. Companies sometimes allow employee liquidity through tender offers or approved secondary platforms.

• Founders: Founders may sell portions of their holdings in controlled secondary transactions to diversify or to meet personal liquidity needs. Founder sales often require board approval and careful negotiation to avoid signaling problems to stakeholders.

• Early investors and angels: Venture capital, angel, and seed investors commonly sell in the secondary market to realize returns, rebalance portfolios, or free capital for new investments. Institutional sellers often seek larger, negotiated trades and may face specific contractual constraints.

Sellers typically need to confirm that shares are vested (if arising from options), fully paid, and free of restrictions that block transfer.

Buyers — accredited investors, institutions, and approved purchasers

• Accredited investors: In many jurisdictions (notably the U.S.), private placements and many secondary transactions are limited to accredited investors — individuals or entities that meet income or net-worth thresholds. Accredited investors commonly include high‑net‑worth individuals, family offices, and certain professional investors.

• Institutional investors and funds: Secondary funds, venture capital firms, and private-equity managers actively buy private stock. Institutions can provide large-ticket liquidity and are often the counterparties for large blocks.

• Strategic buyers: Corporate buyers, acquirers, or partners may purchase private shares if the transaction aligns with strategic interests.

• Approved purchasers: Companies sometimes maintain approved buyer lists and can vet and approve buyers to ensure compliance with governing documents and strategic considerations.

Companies often impose limits or vet prospective buyers to maintain control over ownership, preserve confidentiality, and comply with securities rules.

Market venues and intermediaries

Private-share transactions occur through a mix of structured programs and bilateral arrangements. Common venues and intermediaries include:

Secondary marketplaces (e.g., Forge, Nasdaq Private Market, EquityZen, Hiive, MicroVentures)

Specialized platforms match buyers and sellers, display listings or auction-style offerings, and provide administrative support. These marketplaces help with price discovery, documentation workflows, escrow services, and settlement. They are most useful for smaller transactions and for onboarding accredited investors who want a standardized process.

Key roles of secondary marketplaces:

• Match buyers and sellers and aggregate demand
• Provide indicative pricing based on recent trades and listings
• Perform KYC/AML and investor accreditation checks
• Coordinate company approvals and ROFR processes
• Facilitate escrow, transfer, and custodial arrangements

Company-directed programs (tender offers, buybacks, liquidity programs)

Companies increasingly run structured liquidity options to manage insider selling and employee retention while controlling cap table composition:

• Tender offers: The company invites shareholders to submit offers to sell specified amounts at a stated price. The company may buy back shares directly or facilitate a sale to a pooled buyer.

• Buybacks: A company repurchases shares directly from shareholders to provide liquidity, manage outstanding equity, or redistribute ownership.

• Employee liquidity programs: Scheduled windows, repurchase programs, or platforms that allow employees to sell limited amounts subject to board approval and eligibility criteria.

Company-led programs often provide predictable pricing and reduced counterparty risk but may be limited in scope and size.

Broker-assisted and OTC transactions, funds, and SPVs

• Broker-dealers and OTC trades: Broker-dealers specializing in private securities can arrange over-the-counter (OTC) trades, often for larger blocks. These transactions may be negotiated off-platform with bespoke documentation.

• Secondary funds: Dedicated secondary funds buy private-company shares from employees, founders, and early investors to offer liquidity at scale.

• Special-purpose vehicles (SPVs): Groups of investors (e.g., friends, family, accredited investors) can pool capital into an SPV that purchases a block of private shares, simplifying cap-table interactions and enabling smaller investors to access private deals.

Institutional OTC trades are often subject to confidentiality agreements, side letters, and complex settlement mechanics compared to platform-listing trades.

Step-by-step process to sell private stock

Selling private stock typically follows a multi-stage workflow. Below is a practical seller roadmap.

Confirm ownership, vesting status, and exercise requirements

1. Review your grant documents: Confirm the number of options/RSUs, vesting schedule, and whether options are vested. For RSUs, confirm settlement rules.
2. Exercise considerations: If you hold options, determine exercise cost and timing. Decide between cash exercise, cashless exercise (if allowed), or exercising via a loan or third-party financing.
3. Tax implications: Recognize potential tax triggers at exercise (ordinary income on bargain element for certain options) and at sale (capital gains). Coordinate with a tax advisor for timing.
4. Documentation: Gather stock certificates, option agreements, Form W-9/W-8 (for U.S. tax), government ID for KYC, and any board or plan approvals already obtained.

Valuation, listing or solicitation, and negotiating price

1. Obtain valuation indications: Use the company’s latest 409A or internal valuation, recent financing round price, platform quotes, broker bids, or indicative prices from secondary marketplaces.
2. Decide route to market: List on a marketplace, solicit bids via broker-dealer, or participate in a company tender. Each route offers different timelines and pricing outcomes.
3. Negotiate terms: Price, settlement timeline, escrow arrangements, indemnities, representations, and shareholder covenants are negotiable. Larger or more complex trades often include bespoke warranties or restrictions.
4. Consider execution costs: Platform fees, broker commissions, legal fees, and tax withholding may reduce net proceeds.

Company approval, right of first refusal (ROFR), and transfer restrictions

1. ROFR and ROFO: Many companies grant the company and/or other shareholders a ROFR or right of first offer (ROFO). On receiving a sale notice, the company or designated holders may exercise those rights, delaying or blocking a third‑party sale.
2. Board approval and compliance: The transaction may require board sign-off, cap-table updates, and compliance checks (e.g., accredited investor verification).
3. Lockups and blackout windows: Some companies impose blackout periods around financing events or near an IPO when transfers are restricted.
4. Amendments and waivers: In certain cases, the company or stakeholders can grant waivers to permit a sale under negotiated terms.

Closing, settlement, and paperwork

1. Execute purchase agreement: Buyer and seller sign a share purchase agreement or platform terms that specify price, reps & warranties, escrow instructions, and closing conditions.
2. Escrow and funds: Funds typically pass to an escrow agent pending confirmation of transfer and satisfaction of ROFR/approval conditions.
3. Share transfer: The company records the transfer, issues updated cap table entries, and updates transfer ledgers. If shares were uncertificated, an electronic entry is made.
4. Tax and reporting: Withholding obligations, reporting forms (e.g., Form 1099 in the U.S.), and other tax documents are completed.
5. Post‑close actions: Update investor communications, review continued compliance obligations (e.g., lockups or governance undertakings), and reconcile proceeds after fees.

How to buy private stock

Prospective buyers should understand eligibility and typical entry routes.

Buying on secondary marketplaces

1. Accreditation and onboarding: Most marketplaces require investor accreditation (income/net worth tests), KYC/AML verification, and platform account setup.
2. Bidding or accepting listings: Investors can submit bids, accept existing listings, or participate in platform-coordinated auctions.
3. Due diligence: Platforms provide deal documents, cap‑table snippets, and seller disclosures. Buyers should perform their own diligence proportional to the size of the purchase.
4. Execution and settlement: Upon acceptance, buyers wire funds to escrow and complete required paperwork. After approvals and clearance of transfer restrictions, shares are delivered to the buyer’s custodian account.

Participating in private placements, SPVs, and funds

1. Private placements: Accredited investors can participate in direct private financings (pre‑IPO rounds) by subscribing to offering documents (e.g., subscription agreements, private placement memoranda).
2. SPVs: Small investors can join SPVs that pool capital to buy a single company block. The SPV simplifies cap‑table interactions and often grants the SPV lead (manager) decision rights.
3. Secondary funds: Investors can invest in funds that specialize in buying secondary stakes, providing exposure to diversified private holdings and professional management.

Regulation Crowdfunding and non‑accredited routes

1. Regulation Crowdfunding (U.S.): Certain crowdfunding vehicles allow non‑accredited investors to invest in private companies subject to statutory limits and required disclosures.
2. Regulation A / other exemptions: Some issuers use Regulation A or similar exemptions to raise capital from retail investors, which can provide more retail-friendly access than traditional private rounds.
3. Limitations: Non‑accredited routes are typically smaller, capped, and subject to stricter disclosure requirements.

Valuation and pricing methodologies

Valuing private shares is less transparent than valuing public securities. Common approaches include:

• Last financing round valuation: Using the price per share from the most recent primary financing as a reference point. This can be stale or adjusted for dilution and subsequent developments.

• Precedent secondary transactions: Prices achieved in recent secondary trades for the company provide market evidence but may not reflect current fundamentals.

• 409A/internal valuations: For option pricing and tax purposes in the U.S., private companies obtain 409A valuations; these are conservative fair-market estimates but not transactional prices.

• Discounted cash flow (DCF) and comparables: For larger, later-stage companies with revenue, traditional valuation models and comparable public-company multiples can be used, adjusted for illiquidity and control premiums/discounts.

• Broker/market quotes: Market makers and brokers may provide indicative bids and offers. These quotes can vary materially across providers.

Limitations: Price discovery is imperfect due to infrequent trades, information asymmetry, transfer frictions, and company approval gates. Buyers often demand an illiquidity discount; sellers accept lower prices for speed and certainty.

Legal and regulatory considerations

Key legal checkpoints typically include:

• Securities-law resale exemptions: In the U.S., most secondary sales rely on exemptions from registration (e.g., Rule 144, Section 4(a)(1), Regulation D resale restrictions). Buyers and sellers must ensure reliance on a valid resale exemption.

• Accredited-investor rules: Many transactions restrict purchasers to accredited investors under applicable securities rules.

• Company bylaws and shareholder agreements: Transfer restrictions, ROFRs, drag-along and tag-along rights, and consent requirements govern transfers.

• Disclosure obligations and confidentiality: Sellers often must provide or rely on existing private disclosure documents; certain transactions may carry non-disclosure or confidentiality covenants.

• Anti-money laundering (AML) and know-your-customer (KYC): Platforms and broker-dealers must perform AML/KYC checks to comply with regulations.

• Cross-border considerations: International transactions involve foreign securities laws, tax withholding, and exchange controls. Buyers and sellers should verify cross-border legality.

Consult qualified securities counsel when structuring or accepting complex secondary deals.

Tax and accounting implications

Selling or exercising private stock triggers tax and accounting events that vary by jurisdiction. Typical considerations include:

• Exercise taxation: For incentive stock options (ISOs) in the U.S., exercise may trigger alternative minimum tax (AMT) consequences; non‑qualified stock options (NSOs) usually create ordinary income upon exercise. RSUs are taxable upon settlement.

• Capital gains vs. ordinary income: The difference between sale proceeds and tax basis determines whether the gain is short‑term or long‑term capital gain versus ordinary income. Holding-period rules vary (e.g., ISOs require holding periods for favorable tax treatment).

• Withholding and reporting: Employers or buyers may have withholding obligations on sales or settlements; tax forms (e.g., Form 1099, Form W-2) must be filed appropriately.

• Accounting for private companies: Employee equity expenses (share-based compensation) are recorded under applicable accounting standards (ASC 718 or IFRS 2); secondary transactions can affect cap‑table disclosures and outstanding share counts.

• International tax: Cross-border sellers must consider tax treaties, withholding, and local reporting.

Always consult a tax advisor before exercising options or selling private shares.

Risks and investor considerations

Trading private stock carries distinct risks. Principal risks include:

• Illiquidity risk: Private shares can be hard to sell, and sale timelines can stretch for months. Expect wider implicit spreads.

• Limited disclosure: Private companies typically disclose less information than public companies, increasing information asymmetry.

• Valuation uncertainty: Sparse trading and dependence on stale valuations make price reliability lower.

• Dilution and corporate actions: Future financings can dilute ownership and change preferred/common share economics.

• Lockups and transfer restrictions: Contractual terms may limit the ability to sell shares at will or require company consent.

• Counterparty and platform risk: Buyers and sellers rely on intermediaries and custodians; platform failures, fraud, or operational errors can cause losses or delays.

• Regulatory and compliance risk: Improper reliance on resale exemptions or cross-border compliance failures can lead to clawbacks or sanctions.

Risk management practices:

• Do not allocate capital you cannot afford to hold for extended periods.
• Perform proportional due diligence or rely on reputable intermediaries and counsel.
• Confirm transfer mechanics, tax implications, and company approval processes before committing.

Practical guidance for employees and shareholders

Actionable checklist for insiders considering selling private stock:

1. Review equity plan documents and grant agreements for vesting, exercise price, and repurchase or transfer rights.
2. Confirm current outstanding option status and any required company approvals (e.g., board resolution, ROFR process).
3. Evaluate tax timing: discuss with a tax advisor the implications of exercise and sale timing and consider strategies (e.g., early exercise, Section 83(b) elections where applicable and timely).
4. Consider cashless exercise options or financing solutions if you lack funds to exercise.
5. Use reputable marketplaces or broker-dealers with documented compliance processes and clear fee schedules. Prefer custodial solutions that maintain electronic records.
6. Negotiate and document terms: ensure clarity on price, escrow, representations, and post‑close obligations.
7. Obtain company signoffs and confirm cap-table updates to avoid future disputes.
8. Keep records for tax and audit purposes.

For Bitget users: explore Bitget Wallet for secure private key custody and Bitget’s institutional services for custody and settlement support where applicable.

Market infrastructure, providers, and examples

The private-share ecosystem includes marketplaces, custodians, broker-dealers, and data providers. Representative participants include secondary marketplaces (Forge, Nasdaq Private Market, EquityZen, Hiive, MicroVentures), broker-dealers and custodian networks, and data providers that aggregate private-market pricing and trade volumes.

Custodial solutions and transfer agents modernize ledger management and help support electronic share movement and settlement. Secondary market data providers compile transaction volumes, reported block trades, and indicative pricing to aid participants in valuation and market timing.

Trends and market outlook

Private markets are evolving under several trends that impact liquidity:

• Growth of institutional secondary activity: Institutional secondary funds and strategic buyers have grown, enabling larger, more frequent block trades and providing predictable counterparties for sellers.

• Expansion of retail access via funds and platforms: While direct retail participation remains limited by rules, pooled vehicles, Reg A offerings, and crowdfunding increase indirect access.

• Corporate-managed liquidity: More companies are running structured liquidity programs (periodic tenders, employee stock buybacks) to manage retention and reduce insider sell-side pressure.

• Data and infrastructure modernization: Improved custodial solutions, electronic transfer agents, and platform integrations are reducing settlement friction and increasing market efficiency.

• Macro context: As of January 2026, economic discussions at major forums emphasize inequality and liquidity needs across stakeholders (source: CNN, Jan 16, 2026). Such macro dynamics can influence company decisions on when to offer liquidity programs and how secondary pricing evolves.

Collectively, these trends point toward more institutionalized, but still selective, liquidity for private shares in the near term.

Frequently asked questions (FAQ)

Q: Can anyone buy private stock? A: Not usually. Most private-secondary trades are limited to accredited investors, institutions, or buyer lists approved by the company. Some crowdfunding or Reg A vehicles allow limited non‑accredited participation.

Q: What is ROFR? A: Right of first refusal (ROFR) gives a company or existing shareholders the right to buy shares before a third-party sale completes. ROFR can delay or block external transfers.

Q: How liquid are private shares? A: Private shares are generally illiquid compared to public stocks; sales can take weeks to months, and price discovery is limited.

Q: Do platforms guarantee trades? A: No. Platforms facilitate matching and settlement but do not guarantee that a listed share will sell at a given price; company approvals and ROFRs can also affect execution.

Q: What costs should sellers expect? A: Platform fees, broker commissions, legal fees, potential tax withholding, and possible exercise costs for options.

Further reading and resources

For deeper study, consult primary resources and platform help centers, private-market guides from major marketplaces, official securities regulator guidance (e.g., SEC pages on private placements and resale exemptions), and professional counsel for legal and tax advice. When using wallets or custodial tools, prioritize reputable providers: for Web3 wallet needs, consider Bitget Wallet for secure custody and integration with Bitget services.

Final recommendations and next steps

If you asked "can you trade private stock" because you hold options, want to diversify, or aim to invest in private companies, start by mapping your objectives and constraints. For sellers: gather documentation, confirm vesting and exercise costs, consult tax counsel, and choose a reputable venue or buyback route. For buyers: confirm accreditation, perform due diligence, and understand transfer mechanics and company approvals.

Bitget offers custodial and institutional services that can simplify custody and settlement for qualified participants. To explore private-market liquidity tools, consider reviewing Bitget Wallet and Bitget institutional resources to understand custody, compliance, and settlement options that can support private-share transactions.

Further practical help: if you are an employee considering exercise and sale, consult your company’s equity administrator, a tax advisor, and experienced securities counsel before proceeding.

Explore more on Bitget to discover secure custody and institutional-grade execution tools that support private-market participation.