What sets private shares apart from exchange trading
Private shares are not traded on a regular stock exchange, which means that price and liquidity are determined more by the parties to the deal than by an open market price. This gives greater freedom in negotiations, but also places higher demands on your own analysis and document handling.
In private deals, agreements, the articles of association and any shareholders' agreements play a larger role in how the transfer may take place, which also affects how quickly and easily you can complete a transaction.
Important things to consider with private shares
Here are some key points that are often relevant when you are considering investing in private shares.
- Trading takes place through private transactions between parties
- There is no official stock exchange price
- Liquidity is often lower than on the stock exchange
- Terms in agreements and the articles of association can govern transfers
- The level of information can be more limited
When you take these factors into account, it becomes easier to make well-founded decisions and to understand what it takes to handle private shares safely.
When private shares may be relevant
Worth bearing in mind
Private shares are especially common in smaller companies, start-ups or companies at an early stage whose shares are not traded on regulated markets. Because trading does not happen automatically through a marketplace, you often need to actively look for a counterparty and be prepared to tie up your money for longer.
Understanding the terms for how private shares may be transferred is important before you invest, since the rules and processes can differ from exchange trading.
Frequently asked questions
How do private shares differ from public ones?
Private shares may not be traded freely or offered to the public. Trading often takes place within a smaller group of owners, with more manual processes.
Is it hard to sell private shares?
It can take longer, because buyers have to be found manually and the transfer may be subject to restrictions such as a post-transfer pre-emption right (hembud) or a right of first refusal (förköpsrätt).
How are private shares valued?
The valuation is often based on previous trades, the company's results, its growth potential and negotiation between the parties.
Do you need an agreement for transfers?
Yes. An agreement and correct updates to the share register are central parts of a secure sale.
Are private shares suitable for long-term investments?
Yes. Because trading happens less often and development takes time, private shares are often a long-term type of investment.