How To Buy Unlisted Shares: Complete Guide

Last Updated: January 2026

Overview: Buying Pre-IPO Stock

Buying unlisted shares in private companies has become significantly more accessible over the past decade, but it remains a complex process requiring financial qualifications, patience, and careful due diligence. Unlike purchasing public stock through a retail brokerage account—where you can buy shares in seconds—acquiring pre-IPO stock typically takes 30 to 90 days from initial interest to completed transaction.

The secondary market for private company stock has grown to over $100 billion in annual transaction volume as of 2026. This growth has been driven by companies staying private longer (now averaging 12+ years before IPO versus 4 years in 1999), creating massive demand for employee liquidity and investor access to high-growth private companies.

What you'll need to get started:

• Accredited investor status (income $200K+, joint $300K+, or net worth $1M+ excluding primary residence)
• Minimum investment capital of $10,000 to $100,000+ depending on platform and company
• Long-term investment horizon (expect to hold 2-7+ years)
• Risk tolerance for illiquid, high-risk investments
• Time and expertise for due diligence

Step 1: Verify Accredited Investor Status

The first and most critical requirement for buying unlisted shares is qualifying as an accredited investor under SEC regulations. This requirement exists to ensure investors have the financial sophistication and resources to evaluate and absorb the risks of private securities.

Accredited Investor Criteria (2026)

You qualify as an accredited investor if you meet any one of these criteria:

Income Test:

• Individual income of $200,000+ in each of the past two years with reasonable expectation of the same in the current year, OR
• Joint income with spouse of $300,000+ in each of the past two years with reasonable expectation of the same

Net Worth Test:

• Net worth of $1,000,000+ (individually or jointly with spouse), excluding the value of your primary residence
• Note: Mortgage debt on your primary residence up to its fair market value is excluded from liabilities, but any excess mortgage debt must be included

Professional Certification Test (added 2020):

• Hold an active Series 7, Series 65, or Series 82 license in good standing
• These securities licenses demonstrate professional knowledge of investments

Entity Qualifications:

• Trusts with assets exceeding $5 million, not formed specifically to acquire the securities
• Entities (LLCs, partnerships, corporations) with assets exceeding $5 million
• Entities owned entirely by accredited investors
• SEC-registered investment advisers and broker-dealers
• Banks, insurance companies, and registered investment companies

Verification Process

Platforms and issuers will require you to verify your accredited investor status through one of these methods:

• Income verification: Provide tax returns (W-2s, 1099s, or full tax returns) for the past two years, plus a written statement of reasonable expectation for current year income
• Net worth verification: Provide bank statements, brokerage statements, property valuations, and a balance sheet prepared by you or a CPA showing assets and liabilities within the past 90 days
• Letter from professional: CPA, attorney, investment adviser, or broker-dealer can provide a letter confirming you meet the requirements (dated within 90 days)
• Third-party verification services: Many platforms use services like Verify Investor or Parallel Markets to streamline verification

The verification process typically takes 1-5 business days depending on the method chosen and document quality.

Complete guide to accredited investor requirements and verification →

Step 2: Choose a Secondary Market Platform

Secondary market platforms connect buyers and sellers of private company stock, providing marketplace infrastructure, due diligence support, and transaction facilitation. Each platform has different strengths, minimums, and company availability.

Major Secondary Market Platforms

Forge Global

• Best for: Institutional investors and high-net-worth individuals
• Minimum investment: Typically $100,000+
• Company selection: 450+ private companies including most major unicorns
• Fees: 2-5% transaction fee (negotiable for large transactions)
• Structure: Direct share purchases or SPV investments
• Pros: Largest marketplace, best liquidity, institutional-grade research
• Cons: Higher minimums, can be slower for small retail transactions

EquityZen

• Best for: Retail accredited investors
• Minimum investment: $10,000-$25,000 (varies by deal)
• Company selection: 40+ featured companies, focus on later-stage unicorns
• Fees: 5% transaction fee (built into share price)
• Structure: Primarily SPV investments (you buy into a fund that owns the shares)
• Pros: Lower minimums, user-friendly platform, good educational resources
• Cons: Limited to SPV structure (no direct ownership), smaller company selection

Hiive (formerly Equitybee Marketplace)

• Best for: Flexible investment amounts, employee liquidity
• Minimum investment: $10,000+
• Company selection: Growing marketplace, focus on employee sellers
• Fees: 5% transaction fee
• Structure: Direct and SPV transactions
• Pros: Employee-focused, competitive minimums, growing rapidly
• Cons: Newer platform, less liquidity than Forge or EquityZen

Carta (CartaX)

• Best for: Trading shares in companies using Carta for cap table management
• Minimum investment: Varies by company
• Company selection: 50+ companies, primarily Carta clients
• Fees: Lower fees (1-3%) due to direct company integration
• Structure: Company-approved marketplace
• Pros: Direct company integration, transparent pricing, lower fees
• Cons: Only companies that choose to enable CartaX, limited selection

Zanbato

• Best for: Institutional investors, private equity funds
• Minimum investment: $250,000+
• Company selection: Broad selection of private companies
• Fees: Competitive for large transactions
• Structure: Direct purchases
• Pros: Institutional capabilities, good for large block trades
• Cons: Very high minimums, not suitable for retail investors

Choosing the Right Platform

Consider these factors when selecting a platform:

• Investment size: Match platform minimums to your intended investment
• Target companies: Check which platforms offer access to companies you want
• Ownership structure: Direct ownership vs. SPV (tax and control implications differ)
• Fees: Compare all-in costs including transaction fees, management fees for SPVs, and potential administrative fees
• Platform reputation: Research platform history, reviews, and regulatory compliance

Detailed platform comparison with current offerings →

Step 3: Research Target Companies

Due diligence is the most important step in buying unlisted shares. Unlike public companies with extensive SEC filings and analyst coverage, private companies disclose minimal information. Your research must be thorough and skeptical.

Essential Research Areas

1. Financial Performance

• Revenue growth trajectory (year-over-year and quarter-over-quarter)
• Path to profitability (if not yet profitable, runway and burn rate)
• Gross margins and unit economics
• Customer acquisition costs vs. lifetime value
• Recurring revenue percentage (for SaaS/subscription businesses)
• Cash flow and balance sheet health

Private companies rarely share full financial statements, but platforms often provide revenue snapshots, growth rates, and key metrics. Request as much financial data as possible.

2. Valuation Analysis

• Most recent funding round price per share and total valuation
• Valuation multiples vs. comparable public companies (revenue multiple, P/E ratio if profitable)
• 409A valuation (internal valuation for option pricing)
• Secondary market pricing trends
• Down round risk (has the company raised at lower valuations recently?)

3. Cap Table Structure

• Total shares outstanding and fully diluted share count
• Share classes (common vs. preferred stock) and your rights as a common shareholder
• Liquidation preferences (preferred shareholders may get paid first in exit)
• Conversion ratios and anti-dilution protections
• Option pool size and future dilution potential

4. Market Position & Competition

• Competitive landscape and market share
• Differentiation and defensibility (network effects, switching costs, IP, brand)
• Total addressable market (TAM) size and growth rate
• Customer concentration (risk if top customers represent >20% of revenue)
• Competitive threats from incumbents and startups

5. Management & Governance

• Founder and executive team backgrounds
• Board composition (investor board members signal strong backing)
• Employee retention and Glassdoor reviews
• Previous company exits or successful track records
• Insider selling activity (heavy insider selling can be a red flag)

6. Legal & Regulatory Risks

• Pending litigation or regulatory investigations
• Industry-specific regulatory risks (especially fintech, healthcare, crypto)
• Intellectual property disputes
• Privacy/data security compliance

Information Sources

Gather information from these sources:

• Platform data rooms: Most platforms provide curated information packages
• Company presentations: Pitch decks and investor materials (if available)
• Public sources: News articles, Crunchbase, PitchBook, company blogs, social media
• Network research: Talk to employees, customers, competitors, industry experts
• SEC filings: Some private companies file limited disclosure (e.g., Form D for fundraises)
• Professional research: Some investors commission independent research reports

Learn how to evaluate private company valuations →

Step 4: Understand Pricing & Valuation

Pricing unlisted shares is more art than science. Unlike public stocks with transparent real-time pricing, private share prices are based on infrequent transactions, periodic valuations, and negotiation between buyers and sellers.

Key Price Reference Points

Last Funding Round Price (Primary Market)

This is what institutional investors paid in the company's most recent venture capital round. However:

• Funding rounds may be months or years old (stale pricing)
• VC investors received preferred stock with liquidation preferences (you're buying common stock worth less)
• VCs often negotiate additional rights (board seats, pro-rata rights, information rights) that increase value beyond share price

Expect to pay a discount to the last preferred round price if buying common stock.

409A Valuation (FMV for Common Stock)

Companies obtain 409A valuations to determine the strike price for employee stock options. The 409A represents "fair market value" for common stock and is typically:

• 20-40% lower than preferred stock pricing
• Conservative and backward-looking (based on historical data)
• Updated every 12 months or after material events

The 409A provides a floor for common stock pricing. If secondary market prices are below 409A, that's a red flag suggesting the company's valuation has declined.

Complete guide to 409A valuations →

Secondary Market Trading Range

This is the actual price at which shares are trading hands in recent private transactions. Secondary prices reflect:

• Supply and demand dynamics (more sellers than buyers = lower prices)
• Market sentiment about company's prospects
• Public company comparables
• IPO expectations and timing

Platforms like Forge Global publish indicative pricing showing bid-ask spreads for actively traded companies.

Discount vs. Premium Dynamics

Secondary market prices trade at varying discounts or premiums to funding round valuations:

Discounts (secondary < funding round):

• Weak growth or missed expectations since last round
• Public company comparables down significantly
• IPO window closed or delayed
• Heavy employee selling pressure
• Company-specific concerns (governance, product, competition)

Premiums (secondary > funding round):

• Strong growth exceeding expectations
• IPO imminent (within 6-12 months)
• Limited share availability and high investor demand
• Public company comparables rallying
• Restricted trading creating scarcity

As of Q1 2026, high-quality AI companies like OpenAI and Anthropic trade at premiums to their last rounds, while some fintech and consumer companies trade at 20-40% discounts reflecting lower growth and tougher fundraising environments.

Step 5: Submit Purchase Offer

Once you've identified a company and determined a fair price, you'll submit a purchase offer through your chosen platform.

Offer Components

Your purchase offer will specify:

• Number of shares: How many shares you want to purchase
• Price per share: Your bid price (can be firm or "market price")
• Total investment amount: Shares × price per share + fees
• Offer validity period: How long your offer remains open (typically 30-90 days)
• Conditions: Due diligence requirements, financing contingencies

Matching Process

Platforms match buyers with sellers through different mechanisms:

Direct Matching (Forge, Hiive):

• Platform identifies a seller willing to transact at your price
• You're connected directly (or through platform intermediation) to negotiate final terms
• More flexible but can be slower

SPV Structure (EquityZen):

• Platform creates a Special Purpose Vehicle (investment fund) to pool multiple investors
• The SPV purchases shares from seller(s)
• You invest in the SPV, which owns the shares
• Faster execution but you own SPV interests, not shares directly

Negotiation & Price Discovery

In direct transactions, price negotiation occurs between buyer and seller:

• Seller lists asking price
• Buyer submits bid (can be at, below, or above asking price)
• Platform facilitates negotiation to reach agreement
• Final price depends on urgency, market conditions, and alternatives available to both parties

Step 6: Navigate Company Approval (ROFR)

Most private companies maintain transfer restrictions requiring company approval before shares can change hands. The most common mechanism is Right of First Refusal (ROFR).

How ROFR Works

1. Buyer and seller agree on terms: Price, quantity, and conditions
2. Seller notifies company: Required to inform company of intent to sell at agreed-upon terms
3. Company decision period: Company typically has 30 days to decide whether to:
   • Exercise ROFR: Purchase the shares themselves at the agreed price
   • Waive ROFR: Allow the transaction to proceed with outside buyer
   • Reject transaction: Block the sale entirely (rare, but possible)
4. Secondary ROFR: If company waives, existing investors may have secondary ROFR rights

Why Companies Exercise ROFR

Companies may purchase shares instead of approving outside sales when:

• Managing cap table (limiting number of shareholders)
• Providing employee liquidity through company-sponsored tender offers
• Preventing competitors or unwanted investors from gaining ownership
• Shares are offered at attractive pricing

Why Companies Waive ROFR

Companies typically approve transactions when:

• Buyer is not a competitor or regulatory risk
• Transaction price is reasonable (not artificially low)
• Supporting employee liquidity helps retention
• Company doesn't have cash to purchase shares

Timeline Impact

ROFR process typically adds 30-60 days to transaction timeline:

• Days 1-7: Document preparation and submission to company
• Days 8-38: Company review period (30 days standard)
• Days 39-53: If waived to other shareholders, secondary ROFR period
• Days 54+: Final approval and proceed to closing

This is why pre-IPO stock purchases take months, not minutes.

Step 7: Complete Documentation & Funding

Once ROFR is waived and the transaction is approved, you'll complete legal documentation and fund your investment.

Legal Documentation

Expect to sign several documents:

Stock Purchase Agreement (SPA)

• Defines terms of sale: price, quantity, representations and warranties
• Seller represents they own the shares free and clear
• Buyer represents they're an accredited investor and understand risks
• Indemnification provisions (typically limited)

Restricted Securities Legend

• Acknowledgment that shares are restricted securities under Rule 144
• Cannot be resold except in compliance with SEC regulations
• Stock certificates (or electronic records) will bear restrictive legend

Investment Representation Letter

• Confirms you're acquiring shares for investment, not resale
• Affirms accredited investor status
• Acknowledges risks including illiquidity and total loss possibility

Shareholder Agreement / Rights Agreement

• Governs your rights as shareholder
• Includes ROFR, drag-along, tag-along provisions
• May restrict transferability
• Defines information rights (often limited for small common shareholders)

For SPV Investments:

• SPV subscription agreement
• Operating agreement / partnership agreement
• Management fee schedules (if applicable)

Funding the Investment

You'll wire funds to an escrow account or directly to the platform:

• Payment method: Wire transfer (checks not accepted for large amounts)
• Timing: Funds due within 3-5 business days of signing
• Escrow: Funds held by third party until all conditions met
• Total amount: Share purchase price + platform transaction fees + any legal fees

Tax Documentation

Provide tax forms for reporting:

• W-9 (for US persons) or W-8 (for non-US persons)
• Establishes your tax ID for future reporting
• Platform will issue tax forms (1099-B at sale, potentially K-1 for SPV investments)

Step 8: Receive Share Transfer

After all signatures, approvals, and funding are complete, shares are officially transferred to your name.

Transfer Process

1. Company notification: Transfer agent is instructed to record the change of ownership
2. Cap table update: Company updates its capitalization table to reflect you as new shareholder
3. Share certificate or electronic record: You receive confirmation of ownership
   • Traditional: Physical stock certificate mailed to you
   • Modern: Electronic record in Carta, Shareworks, or other cap table system
4. Platform confirmation: Platform sends confirmation of completed transaction

What You Receive

As a new shareholder, you now have:

• Ownership: Legal title to X shares of Company common stock
• Economic rights: Participation in company value (subject to liquidation preferences)
• Limited voting rights: Ability to vote shares (typically limited by dual-class structure)
• Information rights: May receive basic company updates (but limited compared to preferred shareholders)
• Liquidity restrictions: Subject to ROFR and lock-up provisions

Record Keeping

Maintain detailed records for tax purposes:

• Stock purchase agreement and all transaction documents
• Proof of payment and wire confirmations
• Stock certificate or electronic ownership record
• Cost basis documentation (purchase price + fees = your cost basis)
• Company communications and updates
• Future valuations and funding announcements

Your holding period for capital gains tax purposes begins the day your purchase settles, not when you started the transaction process.

Fees, Costs & Minimums

Understanding the complete cost structure is essential for calculating your all-in investment and expected returns.

Platform Transaction Fees

Additional Costs

SPV Management Fees (if applicable):

• Setup fee: $5,000-$15,000 (amortized across investors)
• Annual administrative fee: $2,000-$5,000 (split among investors)
• These fees reduce your net returns over the holding period

Legal Fees:

• Platform typically handles standard documentation (included in transaction fee)
• If you hire separate counsel for review: $2,000-$10,000
• Only warranted for very large investments ($500K+)

Verification Fees:

• Accredited investor verification: $0-$500 depending on method
• Some platforms charge for third-party verification services

Cost Basis Calculation Example

Investment: 1,000 shares at $50/share = $50,000

• Share purchase: $50,000
• Platform fee (5%): $2,500
• Verification fee: $250
• Total cost basis: $52,750
• Effective price per share: $52.75

When calculating potential returns, use your all-in cost basis, not just the share price.

Alternative Purchase Methods

Beyond secondary market platforms, several alternative methods exist for acquiring unlisted shares.

Direct Purchase from Employees

You can negotiate directly with employees or early investors to purchase their shares without using a platform.

Advantages:

• No platform fees (5% savings)
• Direct negotiation on price and terms
• Potentially faster execution if both parties are motivated

Disadvantages:

• Finding sellers is difficult (no marketplace)
• Legal documentation complexity (need qualified counsel)
• No platform due diligence or escrow services
• Still requires company ROFR approval
• Higher legal costs ($5K-$15K each side)

Direct purchases make sense for very large transactions ($500K+) where platform fees become significant.

Company-Sponsored Tender Offers

Some private companies periodically conduct tender offers allowing employees and early investors to sell shares back to the company or to outside investors at company-set prices.

How it works:

• Company announces tender offer with specific terms (price, eligibility, timing)
• Eligible shareholders submit shares for sale
• If oversubscribed, shares allocated pro-rata or by seniority
• Company or outside investor purchases the shares

Advantages:

• Company-approved (no ROFR delay)
• Transparent pricing
• Lower fees than secondary markets

Disadvantages:

• Infrequent (maybe once per year or less)
• Limited to selling, not buying (unless you're the outside investor funding the tender)
• Typically only open to existing shareholders

As a buyer, you generally can't participate in tender offers unless you're an institutional investor providing the capital for the company buyback.

Pre-IPO Funds and Syndicates

Invest in funds that specialize in pre-IPO companies, providing diversification across multiple private companies.

Types:

• Secondary funds: Buy shares from existing shareholders across multiple companies
• Venture capital funds: Participate in primary funding rounds (higher minimums, longer lock-up)
• AngelList/Titan syndicates: Pool capital with other investors for specific deals

Minimums: $25,000-$250,000+ depending on fund

Fees: 2% annual management fee + 20% carried interest (profit sharing) is typical

Employee Stock Option Exercise Financing

Companies like Equitybee and Secfi provide financing to employees to exercise stock options in exchange for sharing future gains.

As an investor, you can fund these arrangements:

• You provide capital for employee to exercise options
• Employee retains ownership but you receive percentage of future gains (typically 20-50%)
• Minimums typically $10,000-$50,000
• Higher risk but potential for asymmetric returns

Common Mistakes to Avoid

1. Ignoring Liquidation Preferences

The most common mistake is paying common stock prices based on preferred stock valuations without understanding the preference stack. If a company has $3B in liquidation preferences and is valued at $5B, common stock is only worth something above $3B. A 20% decline in value could wipe out common stock entirely.

Solution: Always request cap table information and model different exit scenarios to understand your actual economic position.

2. Overconcentration

With $50,000-$100,000 minimums, a single unlisted share investment can represent 10-30%+ of an investor's liquid net worth. This concentration violates basic diversification principles.

Solution: Limit unlisted share investments to 5-10% of your total investment portfolio. Diversify across multiple companies if possible.

3. Neglecting Tax Planning

SPV structures can generate K-1 forms with phantom income. Early exercises of ISOs can trigger AMT. QSBS tax benefits require meeting specific holding period and criteria.

Solution: Consult a tax advisor familiar with private company investments before investing, not after.

Complete guide to tax implications →

4. Failing to Plan for Illiquidity

Investors underestimate how long capital will be locked up. IPOs get delayed, acquisitions fall through, and secondary buyers disappear during market downturns.

Solution: Only invest capital you won't need for 5-7+ years. Maintain adequate emergency funds and liquidity outside of private investments.

5. Inadequate Due Diligence

Relying solely on platform-provided information without independent research leads to poor investment decisions.

Solution: Conduct thorough independent research. Talk to employees, customers, and industry experts. Review competitive landscape and verify growth claims.

6. Chasing Headlines

Investing in companies solely because they're well-known or receiving media attention often means buying at peak valuations.

Solution: Focus on fundamental value, not hype. The best investments are often in less-publicized companies with strong fundamentals.

7. Ignoring Share Class Differences

Different share classes have dramatically different rights and economics. Some companies have 10+ classes of stock.

Solution: Understand exactly which share class you're buying and what rights it includes (voting, dividends, conversion, participation).

8. Assuming IPO is Imminent

Many investors buy pre-IPO stock assuming an IPO will occur within 1-2 years, only to wait 5-7 years or see the IPO never materialize.

Solution: Don't invest based on IPO timing speculation. Invest based on long-term company value and be prepared to hold indefinitely.