Pre-IPO share sales can require CFO vigilance

Long-tenured employees with stock options in tech companies may have to wait years before a company IPOs and they can sell their shares.

That’s where companies like Forge, Hiive, and EquityZen step in. They provide a secondary marketplace that lets investors and shareholders buy and sell “pre-IPO” shares in private companies, often through a direct share purchase. Companies like SpaceX (before its IPO), Anthropic and OpenAI have reportedly allowed employees to sell shares at times, according to Bloomberg and CNBC.

“Companies are figuring out that they need to allow a level of liquidity for employees that have been long-term contributors,” Kelly Rodriques, CEO of Forge Global, one of the private market secondaries, told CFO Brew. Forge, whose sale to brokerage Charles Schwab closed in March, has enabled trades in more than 600 companies, valued at over $18 billion in total transaction volume, according to its website. Morgan Stanley acquired Forge rival EquityZen in January.

Private companies are generally okay with private market secondaries, but what they may not like is “if transfers of their shares are happening either without them knowing it or without prior approval,” Rodriques said. The marketplaces might also have requirements. Sellers on Forge, for example, must notify and obtain permission from the companies before divesting.

Attention, CFOs. Private companies can put transfer restrictions in their governing documents or stock purchase agreements that give the company the chance to buy the stock first, or “the right of first refusal,” according to Hamilton & Associates Law Group.

However, every situation is different, and it often depends on what a specific company allows, Adam Tope, a partner with law firm DLA Piper focusing on fund formation and secondaries, told CFO Brew. “Generally speaking, most companies would not let [an employee] sell the shares to a third party unless they signed off,” Tope said.

In the private secondaries market, special purpose vehicles (SPVs) can be involved in these transactions. SPVs are legal entities that can buy company shares from existing shareholders, like employees or investors. SPVs are very popular right now, according to Rodriques. They made up just 7% of private share trades on Forge in 2018, but had jumped to 64% in early 2025, CNBC reported last year.

“I don’t know of a company right now…if they’re trading secondaries, that doesn’t have an SPV somewhere in the mix,” Rodriques said. Indeed, some companies might prefer SPVs because instead of having many different investors on their cap table, they just have one, according to Rodriques.

Layering it. One wrinkle with SPVs, though, is they can be layered. A single-layer SPV refers to the entity that owns shares in the company itself. A second-layer SPV owns an interest in the first SPV and doesn’t hold any shares in the company. There can even be third- and fourth-layer SPVs that are removed from the original entity that owns the stake.

Layered SPVs “are not actually selling the underlying shares. They’re selling essentially a fund unit, which is a derivative of the shares. And this has become quite the rage in the last three or four years,” Rodriques said.

DLA’s Tope said he has advised hundreds of SPVs, and says many investors prefer an SPV because of the privacy. “There is nothing wrong with setting up an SPV. An SPV is just an entity. Forming an entity doesn’t breach any laws if formed correctly. There are many good reasons to form an SPV,” Tope said.

Risks. Layered SPVs can be risky for participating investors, however. In August, the SEC charged Adit Ventures Management; its CEO, Eric Munson; and three affiliated general partners “for allegedly defrauding investors and client funds in connection with investments in pre-IPO shares, such as SpaceX and Klarna,” according to an SEC press release.

“In one case, Munson secured more than $15 million from an investor by falsely claiming that an investment vehicle he controlled already owned shares of a certain pre-IPO company stock, when at that point the vehicle did not hold any shares,” the SEC complaint alleges.

Munson, a co-founder of Adit, said in an emailed statement that he rejects “these allegations completely...I am settling this matter because fighting it will not result in any benefit for me or for the investors I have spent my professional life serving. It is not a concession that these charges have any merit whatsoever.”

A boost in investor complaints about SPVs reportedly helped spur the Securities and Exchange Commission to start looking at the firms behind these vehicles, according to the Wall Street Journal.

Cory Jarvis, an SEC spokesperson, said in an email to CFO Brew that the SEC does “not confirm the existence or non-existence of an examination.”

Protections. For CFOs, the market for private secondary sales is worth monitoring. “If somebody is buying into an SPV, the same way that a CFO would want to know who’s buying the shares, the CFO should know and approve any purchase of an SPV interest in the shares, and have the right to restrict it,” Rodriques said.

As a potential IPO gets closer for a company, and the organization has to prepare for public-market discipline and disclosure obligations, some companies have tried to tighten restrictions on secondary share sales, according to Anat Alon-Beck, a law professor at Case Western Reserve Law School.

“Companies suddenly become concerned with transfer restrictions, uncertainty over who actually holds enforceable rights, litigation risk, regulatory scrutiny, and maintaining tighter control over their capitalization tables and shareholder base,” Alton-Beck wrote in a blog. For example, Anthropic and OpenAI, both of which have filed their IPO paperwork, warned investors earlier this year that they would void any sale or transfer of their stock that their boards of directors didn’t approve.

“We do not permit special purpose vehicles (SPVs) to acquire Anthropic stock and any transfer of shares to an SPV are void under our transfer restrictions. Offers to invest in Anthropic’s past or future financing rounds through an SPV are prohibited,” Anthropic posted in February.