Forward Purchase Agreements for Pre-IPO Shares: What Sellers, Buyers, and Fund Organizers Need to Know

You worked at a fast-growing tech company for some time. You exercised your stock options. Now you hold shares in a company valued at tens of billions of dollars – and you cannot sell them.

Or maybe you are on the other side: an investor looking for exposure to SpaceX, Anduril, Stripe, or OpenAI before they go public. You have the capital. You have the appetite for risk. But you have no way onto the cap table.

Or perhaps you are somewhere in between: a fund manager who connects shareholders looking for liquidity with investors looking for access, and structures the deal that makes it happen.

All three of you will, at some point, encounter a forward purchase agreement. And that encounter is increasingly likely. According to William Blair’s 2026 Secondary Market Report, global secondary transaction volume hit a record $220 billion in 2025 (a 42% increase from the prior year) with volume projected to reach $250 billion in 2026, as companies stayed private longer and investors sought liquidity ahead of the anticipated IPO wave, which we analyzed in detail in our recent publication, The 2026 IPO Wave and the Disputes It Will Bring.

The forward purchase agreement has become a common mechanism for making these transactions happen. This guide explains what it is, how it works, and what can go wrong – from the perspective of each side of the transaction.

I. The Problem: Valuable Shares That Cannot Be Sold

Most venture-backed private companies restrict the transfer of their shares. A typical stockholders’ agreement or company bylaws will include some combination of: a right of first refusal (“ROFR”), giving the company or existing shareholders the right to purchase the shares on the same terms before any outside sale; a requirement for board approval of any transfer; a lock-up period during which employees and early investors cannot sell; and contractual restrictions on resale under securities laws, such as Rule 144, Regulation D, Regulation S.

These restrictions serve legitimate purposes. Companies want to control who sits on their cap table, prevent competitors or unfriendly parties from acquiring stakes, and avoid triggering regulatory obligations such as the requirement to register as a public reporting company under Section 12(g) of the Securities Exchange Act of 1934 (“Exchange Act”).

But from the shareholder’s perspective, the result is the same: they own something valuable and cannot access the value. A direct sale of shares requires company consent, ROFR waiver, and often board approval – a process that can take weeks or months, and may be denied outright.

II. The Solution: Forward Purchase Agreements

A forward purchase agreement separates the economic deal from the legal transfer. The buyer gets economic exposure to the shares now. The actual transfer of shares happens later – typically at a liquidity event, when the restrictions lapse or become easier to navigate.

Here is how it works in practice:

The buyer pays the purchase price upfront (or on agreed terms). The price is fixed at signing – this is the “forward price.” In some deals, the price is set at a discount to the last funding round; in others, it reflects a negotiated secondary market valuation.

The seller retains legal ownership of the shares. They remain on the company’s cap table, hold voting rights (unless the agreement provides otherwise), and continue to be bound by their obligations to the company.

Settlement occurs when a triggering event happens – most commonly an IPO, a direct listing, an acquisition, or another qualifying liquidity event. At that point, the seller delivers the shares (or the cash equivalent) to the buyer.

If no triggering event occurs within an agreed period (typically three to five years), the agreement terminates. The buyer usually receives a return of the purchase price, sometimes with interest, sometimes without.

The key feature that makes this structure work is limited recourse: the buyer can only look to the shares themselves (and any proceeds from them) for recovery. The seller’s personal assets are not at risk.

The SPV Layer

In practice, the buyer is rarely a single individual signing a forward agreement directly with a former employee. More often, a fund manager or intermediary creates a special purpose vehicle (typically a Delaware LLC or a Cayman Islands exempted company) that pools capital from multiple investors and enters into the forward agreement as the buyer.

This structure serves several purposes: it lowers the minimum investment for each participant; it simplifies the company’s cap table (one entity instead of dozens of individual investors); it centralizes the securities law compliance (Regulation D or Regulation S) at the SPV level; and in the case of an offshore SPV, it can provide tax efficiency for non-U.S. investors.

The trade-off is that individual investors in the SPV have no direct relationship with the seller. They are members or limited partners of the SPV, not parties to the forward agreement. Their rights and remedies are governed by the SPV’s operating agreement, which makes the quality of that documentation critical.

III. The Enforcement Landscape

Before turning to the practical considerations for each participant, it is worth reviewing what the U.S. Securities and Exchange Commission (“SEC”) has been doing in this space. While several of the cases below involved outright fraud, they illustrate a broader regulatory posture that applies to legitimate market participants as well.

StraightPath Venture Partners (2022-2025). The SEC obtained emergency relief against StraightPath and its principals, alleging a $410 million fraud involving undisclosed fees, commingled funds, and Ponzi scheme-like payments through a network of unregistered sales agents selling interests in pre-IPO series LLCs. The SEC subsequently charged additional sales agents (March 2023) and settled with investment adviser representatives who had assisted in solicitations (January 2025). The core of this case was fraud, but the SEC’s analysis of why the defendants were unregistered brokers applies equally to non-fraudulent intermediaries: soliciting investors, receiving transaction-based compensation, and providing investment advice are broker-dealer activities under Section 15(a) of the Exchange Act, regardless of the structure.

PMAC Consulting (2025). The SEC charged Paul McCabe and PMAC Consulting for acting as unregistered brokers in pre-IPO transactions (negotiating terms, providing valuations, and connecting buyers and sellers) collecting more than $16 million in transaction-based compensation from nearly 100 sellers. Unlike StraightPath, this was not a fraud case: the violation was operating as a broker without registration. McCabe agreed to pay $3 million and accepted an industry bar.

Silver Edge Financial (2023). The SEC charged Silver Edge, its owner, six salespeople, and a related dealer entity with unregistered broker-dealer activity. Silver Edge raised more than $65 million through series LLCs targeting pre-IPO shares. The respondents agreed to cease and desist, industry bars, and more than $3.4 million in disgorgement and penalties.

Prior 2 IPO / Late Stage Asset Management (2023). The SEC charged five individuals and four companies in a $528 million scheme involving undisclosed markups of up to 150% and more than $88 million in illicit profits. This was a fraud case, but it reinforces a point relevant to all organizers: undisclosed fee structures in pre-IPO fund offerings are treated as violations of the antifraud provisions, not merely as disclosure deficiencies.

The pattern across these cases is consistent: interests in SPVs holding pre-IPO shares are securities; persons soliciting and intermediating those interests must register as broker-dealers or fall within an exemption; and opaque fee structures invite enforcement action, whether or not the underlying conduct rises to the level of fraud. Each participant in a forward purchase agreement should understand these precedents before entering into a transaction, and we return to them in the sections that follow.

IV. What Each Side of the Deal Should Watch For

The Seller

You are a current or former employee, an early investor, or an advisor holding shares in a private company. Someone has approached you – maybe a broker, a fund manager, or someone you met at a conference – and offered to buy your shares through a forward agreement. Before you sign anything, here is what matters.

Your company agreements may prohibit this. This is the threshold question. Review your stock option agreement, your restricted stock purchase agreement, your stockholders’ agreement, and the company’s bylaws. Some companies restrict not just the transfer of shares, but any arrangement that confers an economic interest in the shares to a third party. Entering into a forward agreement may itself constitute a breach – even though no shares change hands at signing. The consequences of a breach can include clawback of your shares, termination of unvested equity, and in some cases, claims for damages.

Getting paid upfront does not mean you are done. Once you receive the purchase price, you take on a set of ongoing obligations that may last for years. You must hold the shares without encumbering them. You may need to vote them as directed by the buyer. You must cooperate in the transfer process when the triggering event occurs. You must notify the buyer of any material developments affecting the shares. These are real obligations, and breaching them can expose you to liability.

Tax treatment is not straightforward. Receiving the purchase price upfront may trigger a taxable event even though you have not delivered the shares. Whether the forward is treated as a prepaid forward contract, a constructive sale, or something else depends on the specific terms and the applicable tax rules. This is an area where getting it wrong can be expensive. Consult a tax advisor before signing.

The buyer’s limited recourse protects you – make sure it is in the agreement. A well-drafted forward will limit the buyer’s remedies to a return of the purchase price if you cannot deliver the shares. Without this protection, you could face claims for specific performance, consequential damages, or lost profits – claims that could dwarf the amount you received.

The Buyer

You want exposure to a high-growth private company before it goes public. A fund manager or broker has offered you a chance to invest through an SPV that will enter into a forward agreement with a current shareholder. Here is what you should be thinking about.

The shares may never be delivered. This is the single most important risk. A forward purchase agreement gives you a contractual right to receive shares at a future date. It does not give you shares. If the company exercises its ROFR, refuses to approve the transfer, or the seller breaches their obligations, you will not receive the shares. Your remedy will typically be a return of your purchase price – not the appreciation you were hoping for. You may have tied up capital for years for zero return.

The company may actively oppose the transaction. This is not theoretical. In December 2025, Matt Grimm, co-founder of Anduril Industries (valued at approximately $60 billion at the time), posted a series of statements on X making the company’s position explicit. He described secondary markets as “rife with fraud and bad actors” and stated directly:

“Forward Contracts are explicitly disallowed by Anduril’s stock plan and bylaws, […] which means that Anduril will never consent to [the SPV] actually taking possession of these shares while we are privately held.”

Grimm was responding to a fund that was publicly soliciting investors to invest in an SPV that would invest in another SPV that would enter into a forward contract with an early Anduril employee. The layered structure (an SPV of an SPV buying a forward on restricted shares from a company that explicitly prohibits such arrangements) illustrates both the creativity and the fragility of some secondary market structures.

Anduril is not unique. Many high-profile private companies maintain strict transfer restrictions and actively enforce them. Some have established company-managed tender offer programs precisely to prevent uncontrolled secondary sales. Before you invest, ask whether the company has publicly or privately indicated its position on secondary transactions.

You are buying a contract, not shares. Your investment in an SPV gives you an interest in an entity that holds a contractual right. You are two steps removed from the underlying equity. You have no information rights with respect to the company, no voting rights, no board observer seat, no anti-dilution protection. You are relying on publicly available information, the seller’s disclosures, and the fund manager’s diligence.

Valuation risk is real. The forward price is set at execution, based on whatever the secondary market bears at that moment. If the company’s valuation declines (or if it goes public at a lower price) you overpay. Unlike public market securities, you cannot exit the position before the triggering event. You are locked in.

Understand who you are actually dealing with. Is the fund manager a registered broker-dealer or investment adviser? If not, under what exemption are they operating? Are the SPV interests being offered under Regulation D or Regulation S? Has the fund manager done any diligence on the seller’s ability to deliver – have they reviewed the seller’s stock agreements, confirmed the share class, checked for pledges or liens? These are not rhetorical questions. The answers determine whether your investment is legally sound or whether you are one enforcement action away from losing it.

The Organizer

You are a fund manager, a placement agent, or a deal organizer. You have identified a shareholder willing to sell and investors ready to buy. You are structuring the SPV, drafting the documents, and running the process. Here is what to get right.

Broker-dealer analysis is non-negotiable. If you are soliciting investors, pooling capital, and facilitating the purchase of securities (which is what SPV interests in a forward are), you may be acting as an unregistered broker-dealer. The SEC has been increasingly focused on intermediaries in the pre-IPO secondary market. In the PMAC Consulting case, the SEC charged an individual who had been barred by FINRA from broker activity for continuing to intermediate in the pre-IPO transactions through a consulting entity – negotiating terms, providing valuations, and receiving transaction-based compensation. In the Silver Edge Financial case, the SEC charged not only the firm and its owner, but six individual salespeople who solicited investors for pre-IPO fund interests. You need a clear analysis of whether your activities require registration or fall within an exemption, and you need that analysis before you take the first dollar from an investor.

Securities law compliance at the SPV level. The interests in your SPV are securities. You must comply with Regulation D (if offering to U.S. accredited investors), Regulation S (if offering to non-U.S. persons), or both. This means proper subscription agreements, investor verification, Form D filings, and compliance with state blue sky laws. Cutting corners here creates liability that can follow you for years.

Diligence on the underlying shares. Before you put the deal together, you need to understand what the seller actually owns, what restrictions apply, and whether the company has any track record of approving or blocking secondary transfers. Review the seller’s stock purchase agreement, any stockholders’ agreement, the company’s bylaws, and any prior correspondence with the company about transfers. If the company explicitly prohibits forward agreements (as some do) marketing the deal as a viable investment is at best misleading and at worst fraudulent.

Fee transparency. The pre-IPO secondary market has attracted criticism for opaque and excessive fee structures: management fees, carried interest, placement fees, administrative fees, and markups on the forward price. In the Prior 2 IPO case, the SEC alleged that defendants charged undisclosed markups while promising investors there were no upfront fees. Transparent fee disclosure is not just good practice – it is a regulatory requirement under federal and state securities laws.

Offshore structuring: Cayman and BVI. Sometimes you want to structure the SPV offshore. A Cayman exempted company or BVI business company can provide tax efficiency and flexibility in structuring economics. But it comes with obligations: registration under the Cayman Private Funds Act if the vehicle has multiple investors; compliance with anti-money laundering requirements; FATCA and CRS reporting for U.S. and other tax-resident investors; and economic substance requirements. These are real compliance costs, and they need to be built into the fund economics from the start.

V. Structuring Options

A forward purchase agreement is not the only way to structure a secondary transaction. The right structure depends on the company’s transfer policies, the seller’s risk tolerance, and the buyer’s timeline. Here are the three most common approaches.

Option 1: Direct Secondary Sale (with Company Consent). The simplest approach. The seller obtains a ROFR waiver and board approval, then transfers shares directly to the buyer or an SPV. This requires the company’s active cooperation, which means it works only when the company is willing to facilitate secondary liquidity – either because it has an established transfer process or because the seller has sufficient leverage. The advantage is clean title transfer and no ongoing obligations for the seller. The disadvantage is that many companies will refuse, delay, or impose conditions that make the transaction uneconomic.

Option 2: Forward Purchase Agreement (SPV Structure). The structure this guide focuses on. The buyer (typically an SPV) pays the forward price upfront; the seller retains legal ownership until a triggering event. This structure avoids the need for company consent at signing, unless the company’s corporate documents explicitly prohibit forward arrangements or any transfer of economic interest. The disadvantage is counterparty risk (the seller may not be able to deliver), the company may actively oppose the arrangement, and the buyer may wait years with capital locked up and no guarantee of receiving shares. This is one of the most common structures in the current market, but it requires careful documentation, particularly around limited recourse, triggering events, and the consequences of company refusal.

Option 3: Company-Managed Tender Offer. Some companies, particularly those that want to provide shareholder liquidity while maintaining cap table control, run periodic tender offers. The company sets the price (often at or near the last funding round valuation), selects the buyers, and manages the entire process. For sellers, this is the lowest-risk option: the company facilitates the transfer, so there is no risk of breach. For buyers, the company’s involvement provides a degree of diligence that is absent in the uncontrolled secondary market. The disadvantage is limited availability – tender offers are at the company’s discretion, may be infrequent, and are typically offered only to employees and early investors, not to outside fund managers.

VI. The Company’s Perspective: Why They Push Back

It is worth understanding why companies resist secondary transactions. Their objections are not arbitrary:

Cap table control. Companies, especially pre-IPO, want to know who their shareholders are. Allowing unrestricted secondary sales can result in unknown parties, competitors, or hostile actors acquiring meaningful positions.

Regulatory risk. Under Section 12(g) of the Exchange Act, a company with total assets exceeding $10 million and 2,000 equity holders of a certain class (or 500 or more persons who are not accredited investors) must register that class of securities with the SEC and become a public reporting company. Every secondary transfer that adds a new holder of record moves the company closer to this threshold. SPV structures help (one SPV equals one holder of record), but look-through rules can apply.

Signaling. Large-scale secondary selling by insiders can signal a lack of confidence in the company’s prospects, even if the sellers’ actual motivation is simply personal liquidity.

Information leakage. Secondary market participants often request and share nonpublic information about the company in the course of diligence, creating risks around selective disclosure and competitive intelligence.

Some companies have responded by creating structured liquidity programs – periodic tender offers where employees can sell a limited number of shares at a price set by the company or through a company-selected broker. These programs give shareholders some liquidity while allowing the company to maintain control over the process, pricing, and buyer selection.

VII. Practical Takeaways

Regardless of which side of the transaction you are on, here are the fundamental principles:

For sellers 

Read your company agreements before you sign anything. Understand whether a forward contract is permitted, tolerated, or prohibited. If prohibited, understand the consequences and make an informed decision about whether the risk is worth the liquidity. Make sure the agreement includes limited recourse and exclusive remedy provisions that protect you if the company blocks the transfer. Get tax advice.

For buyers 

A forward purchase agreement is a bet on two things: the company’s future value and the seller’s ability to deliver. Do not focus only on the first one. Ask hard questions about the second. Understand that you may wait years and receive nothing more than your money back. Evaluate the fund manager as carefully as you evaluate the investment – the enforcement record shows that unregistered intermediaries, undisclosed fees, and inadequate diligence are not edge cases but recurring features of this market.

For organizers 

Your reputation is your business. A deal that collapses because the company refuses to approve the transfer (or because the securities law structure was deficient) is a deal that damages your ability to do the next one. Invest in proper legal infrastructure: broker-dealer analysis, Reg D/Reg S compliance, thorough seller diligence, transparent fee disclosure, and well-drafted SPV documentation. The cost of doing it right is a fraction of the cost of doing it wrong.

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If you are navigating a secondary transaction, whether as a shareholder seeking liquidity, an investor evaluating an SPV opportunity, or an organizer structuring the deal, our team can help. Reach us at crypto@buzko.legal.