Hi
So me and my partner are looking to enter the property market in the next year or two. We have saved enough for a comfortable LVR.
My partner has equity as shares in a tech company that really took off during Covid. Company is still private and looking to IPO in the near future.
Can equity like this be leveraged to bolster our position? I mean Musk and Besos use share equity to get loans right?
Sell to who? Company is still trading privately. She would have to quit to cash out
You can sell to anyone you like. Doesn’t have to be on a stock exchange to sell.
no, but generally private companies have some pretty strict rules on existing share owners and who/how/the method/required noticed etc required to sell shares
@SBOB: I wouldn’t say generally. But certainly possible and you’re right you would need to see if there are any restrictive conditions attached.
Unfortunately won’t help the op in any event. With any luck you can sell them to someone you know or someone who knows the company and wants skin before an IPO
And that’s why they count for nothing as far as the bank is concerned.
Yeah fair enough. The idea popped into my head after hearing billionaires use stock to get loans
@flipfire: You can use publicly listed stock as collateral no problem, the person offering the loan needs to be able to take possession and liquidate the asset for $$$ though, and the ratio of asset value to loan amount gets worse and worse the more volatile the asset is, as does the interest rate.
Major lenders only lend against relatively stable stocks from a pre approved list. Minor lenders can do what they want but ultimately want a way to get their money back (with $$$ for the admin headache).
Does she own shares of the company or does she own options for shares dependent on the IPO and her continued employment?
Not entirely sure will need to ask. Does it make a difference in terms of helping out a mortgage?
She did sell some in a buyback scheme and paid off her HECS debt
@flipfire: Oof, paying off an interest free loan with an investment you expect to increase in value.
@AustriaBargain: Interest free but indexation/inflation still applies. We wanted to get rid of all debt for a mortgage application.
Valuations were overvalued at the time of sale so only had to sell a small amount. Its probably worth half now with the recent tech crash
Sell to who? Company is still trading privately
Then you answered your own question then if they can be used. There is no 'equity' in these options until they can be sold.
What’s the company called? How long until ipo?
Can equity like this be leveraged to bolster our position? I mean Musk and Besos use share equity to get loans right?
Yeah, nah. As has been canvassed above, this equity cannot be easily sold, therefore your bank isn't going to be interested.
Separately, even if listed, you won't be able to use those shares as equity/security on the mortgage. Best you could do would be to get a margin loan against the shares and drop that cash into the mortgage.
Unfortunately not. Sell and use the cash