A practical look at how non-dilutive liquidity solutions work for shareholders of late-stage private companies — including key terms like PIK rate, ATV, stock fees, and the difference between NSOs and ISOs — and the types of businesses Serengeti typically supports.
Founders, early employees, and long-term shareholders at high-growth private companies often face a familiar challenge: a large portion of their net worth is tied up in illiquid equity. They may be "paper wealthy," but real-life needs — buying a home, diversifying risk, covering taxes, funding education, or starting a new venture — continue. Traditional options like secondary sales are frequently restricted by company policies, heavily discounted, or simply unavailable until a future liquidity event.
Private stock finance offers an alternative. It allows eligible shareholders to access capital using their private company shares as collateral, without selling the shares or giving up future upside.
Private stock finance is a structured financing solution in which a shareholder can use privately held equity (typically late-stage preferred or common shares, or vested options) as collateral for a cash advance or similar financing. The capital can be used for personal or professional purposes, while the shareholder retains ownership of the underlying shares.
Key characteristics typically include:
Serengeti has provided these solutions for more than seven years, underwriting structures that give shareholders access to liquidity while creating structured exposure.
Several concepts appear frequently in private stock finance structures. Here is a plain-language overview of the most common ones:
A PIK rate is interest that accrues and is added to the outstanding principal balance rather than being paid in cash during the life of the financing. This means the total amount owed grows over time. It is common in private stock solutions because the underlying shares do not generate cash flow that could be used for periodic interest payments. At a liquidity event or repayment, the shareholder settles the original advance plus the accrued PIK.
ATV is the percentage of the current estimated value of the pledged shares that the financing provider is willing to advance. For example, an ATV of 30–40% means a shareholder with $1 million of equity value might receive $300,000–$400,000 in capital. The ATV reflects the provider's underwriting of the company, the type of shares, expected time to liquidity, and other risk factors. Higher ATVs are generally available on more mature companies or preferred shares.
A stock fee (sometimes called an equity fee or participation fee) is a portion of the collateral that the financing provider receives as part of the terms of the financing. This aligns the provider's return with the performance of the underlying company while still leaving the majority of the upside with the shareholder. It is distinct from the PIK interest, which is a fixed or floating rate on the capital advanced.
Many private stock finance transactions involve employee stock options. The tax treatment differs significantly between the two main types:
In both cases, private stock finance can sometimes be used to help cover the cost of exercising options (including any associated taxes) without requiring the shareholder to sell shares or use personal cash. The specific structure depends on the option type, the company's equity plan, and the individual's tax situation. Participants should consult their own tax advisors, as outcomes vary.
For many participants, private stock finance addresses practical gaps that secondary sales or waiting for an exit cannot:
The structure is most commonly used by employees and early shareholders at companies that have achieved meaningful scale and valuation but remain private. It is not a substitute for company-sponsored tender offers or secondary programs when those are available; it is an additional option when shareholders need flexibility outside those windows or for those who prefer to not sell their shares in a tender and retain their equity exposure while still receiving cash.
Serengeti focuses on high-growth companies where equity is valuable but illiquid, and where the firm can underwrite the opportunity with a clear view of the business and potential exit paths. In practice, this has centered on two broad categories:
Across both areas, Serengeti looks for situations where the underlying company has strong fundamentals, a credible path to liquidity or continued value creation, and shareholders who can benefit from structured, non-dilutive capital.
As more companies remain private longer, the demand for flexible liquidity solutions for employees and shareholders is likely to persist. Private stock finance is one tool — alongside company tender offers, secondary sales, and other structures — that can help align personal financial needs with long-term ownership. Understanding the key mechanics (PIK accrual, advance-to-value, stock fees, and the tax differences between NSOs and ISOs) helps shareholders evaluate whether a given structure fits their situation. Serengeti continues to underwrite these opportunities through its established partner channels, focusing on high-growth technology and defense-related companies where the combination of business quality and shareholder need creates an attractive opportunity.