Pricing, tax & closing
Valuing an Illiquid Stake
The comparable-round-plus-discount method most secondary prices actually use.
There's no public exchange price for a private company's stock, so secondary buyers and sellers anchor to the most recent priced round and adjust with a discount (or, for in-demand companies, a premium) that reflects illiquidity, limited information rights, and time to the next liquidity event.
The typical discount range cited across this market runs roughly 10–30% below the last round, though the right number for any specific deal depends heavily on how sought-after the company is and how stale the last round's pricing has become.
How it works
- Start from the last priced round's per-share (or common-equivalent) price as the anchor — adjusted first for the 409A gap if you're valuing common stock specifically.
- Apply a discount reflecting illiquidity, the buyer's reduced information rights, and how long until a plausible next liquidity event.
- Adjust further for company-specific demand — a widely sought-after, soon-to-IPO name can trade at a premium to its last round rather than a discount.
- Cross-check against any recent comparable secondary trades in the same company, if the seller or platform can point to them.
Worked example
The last priced round implies a common-equivalent price of $2.00 per share. A buyer applies a 22% illiquidity and information-risk discount.
- Last round anchor price
- $2.00 / share
- Discount at 10%
- $1.80 / share
- Discount at 22% (this buyer's offer)
- $1.56 / share
- Discount at 30%
- $1.40 / share
Why it matters: A 20-percentage-point swing in the discount assumption moves the price by $0.40 per share on a $2.00 anchor — a large enough gap that "what discount is reasonable here" is usually the actual negotiation, not the anchor price itself.
Watch out for
- A stale last round (18+ months old) is a weaker anchor than a recent one — weight it accordingly, or look for a more recent reference point like a continuation-fund price.
- Don't skip the 409A step if you're pricing common stock specifically — see 409A vs. last-round pricing for why the preferred-round number alone overstates common's value.
- A premium-to-last-round price is real for sought-after names, but treat any specific premium claim skeptically without a comparable recent trade to back it up.