Secondary Pricing Discount
The discount at which private shares trade on secondary markets relative to the last funding round.
Definition
Secondary pricing discount is the difference between the last funding round price per share and the price at which shares trade on the secondary market. Private shares typically trade at a 10-40% discount to the last round price due to illiquidity, transfer restrictions, lack of information, and the risk of future down rounds. The discount narrows as the company approaches an IPO.
Why it matters
The secondary market discount reveals how much the market actually values your shares, which is often less than the headline valuation. If shares trade at a 40% discount, the market thinks the last round's valuation was too high.
Example
Your company's last round priced at $50/share. On the secondary market, shares trade at $32 (a 36% discount). This suggests the market values the company at roughly 64% of its last round valuation. As an IPO approaches, the discount may narrow to 10-15%.