Secondary sale windows: the fastest way smart people lose control of their equity

But that is not what's really happening.

Often, what you are actually being asked, quickly, with imperfect information, is:

• How much to sell (i.e. how much single-company risk you keep.

• What to sell (often a plan/tax mechanics issue disguised as “strategy”).

• Whether to sell at this valuation (which is always judgement, never certainty).

A useful way to see it is this: a secondary window is a governance moment for the company - because it forces decisions on fairness, valuation, dealing controls and tax mechanics - and it’s a governance moment for employees because it is one of the few chances to de-risk without exiting the story you've been sold (sorry, believe in). Read here.

A fool and his money are soon parted. But what about the smart person with their equity?

Why these decisions go wrong (even for very analytical people)

1) Research becomes procrastination

Smart people have a tendency to consume every detail and spreadsheet they can find, then stall because the most important inputs are unknowable: timing, valuation path, next liquidity event, tax position and the company’s ability to keep compounding.

When the future is uncertain, more reading doesn’t create clarity. It often just delays commitment.

2) Internal consensus is always the best guide

Internal channels can create a “shadow investment committee” where a small group of influential people sets the narrative, e.g. “Holding is the smart move.” Sometimes it is. Often it’s simply the move that fits their life, their stage and risk profile.

3) Doing nothing is not neutral

If you don’t actively choose, you are choosing to stay concentrated: salary risk + equity risk tied to the same single outcome. That can be fine. But it should be a deliberate position, not an accident caused by inertia.

Start with constraints, not opinion

Before you get philosophical about “belief” and “upside”, do the unsexy work: confirm what is actually possible in your plan.

Here’s a possible checklist that helps prevent bad outcomes:

• What can you sell? Vested only? Fully-paid shares only? Certain classes excluded? Any transfer restrictions or company consents required?

• What’s the cashflow reality? Withholding, payroll reporting, tax reserve expectation - what will you actually receive, net?

• What’s the leaver exposure? Post-termination exercise windows, buyback/forfeiture mechanics, good/bad leaver pricing. These rules can change the economics more than the secondary price.

• What’s the admin friction? Elections, forms, deadlines, broker steps, board approvals - can you execute cleanly in time?

• What’s the policy position? Blackouts, internal dealing rules, information asymmetry constraints.

In UK private companies, the answer often sits in the plan rules and the Articles: EMI/CSOP exercise constraints and funding, leaver compulsory transfer pricing, pre-emption/consent mechanics and whether the buyer is an approved transferee.

If you can’t answer those questions, you’re not yet deciding “sell vs hold”. You’re deciding based on incomplete mechanics - and that’s how people regret these events.

The three tests (a cleaner way to decide)

Rather than one giant decision (“sell or not”), run three smaller tests. If your decision matrix fails one test, evaluate whether overall it's the right decision.

Test 1: Fragility (the personal balance-sheet test)

This is the pure risk question: how fragile is my position if the company stalls or re-prices?

You’re looking for concentration risk plus timing risk:

• your income is linked to the business,

• your wealth is then linked to the same business,

• and liquidity is intermittent and discretionary.

Reducing fragility isn’t “selling out”. It’s removing a single-point-of-failure risk.

Test 2: Regret profile (the psychology test)

The real trade-off isn’t money vs money. It’s regret vs regret.

Ask yourself bluntly:

• Which outcome would irritate me more in two years: missing upside, or staying overexposed?

• Would taking something off the table make me calmer and more rational or would it feel like abandoning conviction?

This isn’t soft. It’s decision hygiene. People who ignore it usually make a second decision later, under worse conditions.

Test 3: Optionality (the career test)

Equity can reduce freedom: you don’t move role because you feel you “can’t afford” to. Sometimes that’s the intended retention effect. Sometimes it’s just a trap created by plan mechanics.

A secondary can buy optionality - time off, a pivot, a move without panic. If your equity position makes you feel stuck, that is relevant data, not a character flaw.

The practical conclusion: aim for defensible, not perfect

A good secondary decision is not one that looks brilliant in hindsight. It’s one that is defensible at the time, given:

• the mechanics (what you can actually do),

• the downside (what could realistically go wrong),

• your tolerance for regret, and

• your need for optionality.

My default heuristic is simple: sell enough to remove fragility; keep enough to retain belief. And then write down why - because if you don’t, you will re-litigate the decision every time the valuation moves.

If you’re a company running a secondary window, treat it like governance, not comms: publish the rules early, explain allocation logic and make net-of-tax outcomes legible. Done well, secondaries build trust and retention. Done badly, they create rumours, resentment and a workforce that feels the “equity story” only works for the special few.

At Burges Salmon, we see secondary windows work best when they’re treated as an operating model, not a perk: clear plan rules, clean settlement and withholding mechanics, realistic education, and decision support that recognises that “maths only” is how smart people end up making very predictable mistakes.