Secondary Sales
How to buy and sell existing shares in personal tokens through the secondary market
What are Secondary Sales?
Secondary sales allow existing shareholders to sell their equity in personal tokens to other investors. This creates a liquid market for personal token shares and provides exit opportunities for early investors.
The Secondary Sale Process
Initiating a Sale
When a shareholder wants to sell their equity, they create a Secondary Sale Request that includes:
- Number of shares they wish to sell
- Asking price per share
- Offer validity period (how long the offer remains active)
- Any specific terms or conditions
Secondary sales provide liquidity for investors while maintaining the token owner’s control over their cap table composition.
Right of First Refusal (ROFR)
Similar to private companies, personal tokens implement a Right of First Refusal system to protect token owners and existing shareholders.
ROFR Timeline
Sale Request Created
Shareholder initiates a Secondary Sale Request
Token Owner Priority (14 days)
Token owner has first opportunity to purchase shares Can accept, decline, or negotiate terms
Existing Shareholders (7 days)
If token owner declines, existing shareholders get second priority Multiple shareholders can participate proportionally
Open Market (If Not Purchased)
If no existing parties purchase, shares can be offered to new investors All transfers still require token owner approval
Benefits of ROFR
For Token Owners:
- Maintain influence over cap table composition
- Prevent unwanted parties from acquiring shares
- Opportunity to consolidate ownership
- Control over shareholder relationships
For Existing Shareholders:
- Maintain their ownership percentage
- Prevent dilution from new investors
- Access to additional shares at market prices
- Alignment with other shareholders
Royalty Structure
Each completed secondary sale generates a 2% royalty fee automatically collected from the transaction value.
Fee Distribution
- 1.5% goes to the token owner
- 0.5% goes to the Network
Example Calculation
If an investor sells 50,000 shares at $5 per share:
- Transaction value: $250,000
- Total fee: $5,000 (2%)
- Token owner receives: $3,750 (1.5%)
- Network receives: $1,250 (0.5%)
- Seller receives: $245,000
This royalty structure incentivizes token owners to approve secondary sales, creating ongoing revenue while providing liquidity for investors.
Secondary Market Mechanics
Pricing Discovery
Secondary market prices are determined by:
- Recent performance of the token owner
- Dividend history and expected future returns
- Market sentiment and demand
- Portfolio composition and asset performance
- Overall Network conditions
Transaction Types
Partial Sales:
- Sell portion of holdings while maintaining position
- Common for profit-taking or portfolio rebalancing
- Allows continued participation in token growth
Complete Exit:
- Sell entire position in a personal token
- Full liquidity event for the investor
- May trigger tax implications
Strategic Purchases:
- Existing shareholders increasing their position
- New investors entering at market prices
- Token owners consolidating control
Marketplace Features
Internal Network Marketplace
The Network provides built-in tools for secondary sales:
- Listing management - Create and manage sale requests
- Price discovery - View recent transaction history
- Buyer matching - Connect sellers with interested buyers
- Automated processing - Handle ROFR periods and transfers
Verification Requirements
All secondary market participants must be:
- Verified users in the Network
- Approved by token owner for new investors
- Compliant with transfer restrictions
- Able to complete transactions with sufficient capital
Shares can only be transferred to other verified users in the Network. Token owners maintain approval rights for all new shareholders.
Strategic Considerations
For Sellers
Timing Your Sale:
- Consider recent token performance
- Evaluate market conditions
- Plan for tax implications
- Assess future growth potential
Pricing Strategy:
- Research recent comparable sales
- Factor in dividend history
- Consider demand for the specific token
- Balance speed vs. price optimization
For Buyers
Due Diligence:
- Review token owner’s track record
- Analyze dividend payment history
- Assess current portfolio composition
- Evaluate growth trajectory
Investment Approach:
- Consider as part of diversified strategy
- Evaluate relative to primary market opportunities
- Factor in liquidity preferences
- Plan holding period and exit strategy
Example Secondary Sale
Let’s walk through a complete secondary sale scenario:
Initial Situation
Alice owns 100,000 shares of Bob’s personal token She purchased them 3 years ago at 200,000) Current market conditions suggest $5/share value
Sale Request
Alice creates a Secondary Sale Request for 50,000 shares at 250,000 14-day ROFR period begins
Token Owner Decision
Bob (token owner) declines to purchase Existing shareholders get 7-day priority period
Shareholder Purchase
Charlie (existing shareholder) agrees to buy all 50,000 shares Transaction processes automatically
Final Settlement
Total transaction: 5,000 (2%) Bob receives: 1,250 (0.5% royalty) Alice receives: $245,000 Charlie receives: 50,000 shares
Tax Implications
Secondary sales may trigger capital gains taxes. Consult with tax professionals to understand your obligations.
For Sellers
- Capital gains calculation - Sale price minus original purchase price
- Holding period - Short-term vs. long-term capital gains rates
- Tax optimization - Timing sales for favorable treatment
- Record keeping - Maintain documentation for tax purposes
For Token Owners
- Royalty income - 1.5% fee is taxable income
- Reporting requirements - Track royalty payments received
- Business considerations - May affect token owner’s tax situation
Best Practices
Creating Liquidity
- Encourage secondary trading - Approve reasonable transfer requests
- Provide transparency - Share regular updates with shareholders
- Build market demand - Demonstrate consistent performance
- Support price discovery - Allow fair market pricing
Managing Your Position
- Regular portfolio review - Assess holdings periodically
- Diversification strategy - Balance concentration risks
- Exit planning - Know when and how to realize gains
- Tax optimization - Structure sales efficiently