October 21, 2026 · 7 min read
What Is Private Company Stock? How Shares in a Private Company Work
How shares in a company that is not listed work: who holds them, how employees get them and how holders sell.
- Private markets & secondaries
Yes, private companies have stock. A private corporation is owned through shares, just like a public one. The difference is that its shares do not trade on a stock exchange. Founders, investors and employees hold them, and the company controls who may buy or sell. That matters if you hold stock options, work at a startup or invest before an IPO.
Private company stock can be worth a lot on paper and still be hard to turn into cash. There is no daily price. Selling usually needs the company’s approval. The usual ways to cash out are a tender offer, a sale of the company or an initial public offering (IPO).
2,000
Holders of record, or 500 non-accredited ones, that push a company with over $10M in assets into SEC registration
$10M
Equity sold to employees in 12 months above which a private company must add risk and financial disclosure
30 days
Deadline for an 83(b) election after you receive restricted stock
$61.1B
Sales of existing venture-backed shares, more than all venture-backed IPOs raised ($58.8B)
How Do Shares in a Private Company Work?
A private share gives you the same basic claim as a public one: a slice of the company’s value. What changes is how you get in, how the price is set and how you get out.
- IssuingThe company sells new shares in funding rounds and grants them to employees. Each issue lowers every existing holder’s percentage. That is dilution.
- PricingThere is no market price. Investors set a price for preferred stock in each round. An outside appraiser sets the value of common stock for tax purposes, called a 409A valuation.
- HoldingThe shares are restricted securities. Under Rule 144, they must be held at least one year before public resale while the company does not report to the SEC.
- TransferringCompany documents limit sales. Delaware law lets a company require its consent, give itself a right of first refusal to buy first, or bar sales to named buyers.
- ExitingYou get cash when the company is sold, lists or buys shares back. You can also sell to another investor if the company allows it.
Private shares do change hands, and in size. In the year to mid-2025, sales of existing venture-backed shares reached $61.1B, Carta reports. That was more than all venture-backed IPOs raised. These sales are called secondary transactions.
Private Company Share Types and What Each Gives You
Six ways to own a piece of the same private company. Only two of them are shares from day one
Standard US practice as of October 2026. Exact rights are set in each company’s charter and plan documents.
What Rights Come with Private Company Shares?
A private company with shares gives its holders rights set by state law and its charter. Shareholders usually vote on major decisions, such as electing the board or selling the company. Preferred holders often negotiate more: board seats, vetoes, a liquidation preference and pro rata rights to buy into later rounds. Common holders usually get fewer rights and less information.
Private Company Stock Grants: How Employees Get Equity
Can Private Companies Give Stock to Employees?
Yes. A private company can grant stock and options to employees without registering them with the SEC. It uses Rule 701, an exemption for written compensation plans. The plan can cover employees, directors, officers and some consultants. Most grants vest over time, so you earn them by staying.
Rule 701 caps how much a company can grant in any 12 months. The limit is the greatest of $1M, 15% of its total assets or 15% of the outstanding shares of that class. If grants exceed $10M in 12 months, the company must also give staff risk information and financial statements.
Taxes depend on the award. With restricted stock, you can file an 83(b) election within 30 days of the grant. It lets you pay tax on today’s value, which is usually low, and not on the value at vesting. Options and units follow other rules. See equity compensation, RSUs and ISO vs NSO.
The 30-Day Deadline Does Not Move
An 83(b) election is due no later than 30 days after the shares are transferred to you. A late election is not valid. Talk to a tax adviser before you receive the shares.
Do Private Company Shares Pay Dividends?
They can, but growth companies rarely do. In Delaware, the board may pay dividends only out of surplus, or out of net profits for the current or previous year. A startup that spends more than it earns has no profits to share. Its investors expect the payout to come from a sale or an IPO.
Preferred stock may carry a dividend right in the charter. Unless the charter makes it cumulative, it is paid only if the board declares it. Mature, profitable private companies, such as some family-owned businesses, do pay regular dividends to their shareholders.
Why Do Private Companies Do Tender Offers?
A private company runs a tender offer to let employees and early investors sell some shares without an IPO. The company, or investors it approves, buys at one price within a set window. Stripe, in its sixteenth year as a private company, was valued at $159B after a tender offer in February 2026, CNBC reported.
- Keep staffEmployees can turn part of their equity into cash while staying. That helps a company that stays private for years.
- Control the saleOne price, one window and approved buyers replace scattered private sales the company would have to review one by one.
- Bring in new investorsFunds that want a stake can buy existing shares. The company raises no new money and issues no new shares.
How it works for an employee is covered in employee tender offer, and the rules in tender offer.
Key Rules for Private Company Stock, as of October 2026
Federal rules decide who can hold and when they can sell. The company’s own documents decide whether it lets them
As of October 2026 · SEC Exchange Act registration page (09.22.2025); 17 CFR 230.144, 230.701; 26 U.S.C. 83; 8 Del. C. §202. US federal and Delaware rules only.
Is Stock in a Private Company Worth Anything? A Worked Example
You exercised options and own 20,000 shares of common stock in a private company. On the same day, four different prices apply to the company’s stock.
Illustrative figures for an invented company. The round price applies to preferred stock, so it overstates what common is worth
Illustrative example · as of October 2026.
The answer to “what is my stock worth” ranges from $240,000 to $600,000. The cash you can actually get this year is $96,000. The rest is worth something only if the company is sold or lists at a good price.
What Happens When a Private Company Goes Public?
Preferred stock usually converts to common, and all shares become listed stock. You typically cannot sell for about 180 days because of an IPO lock-up. Shares you got under Rule 701 can then be sold 90 days after the listing, without the Rule 144 holding period. See pre-IPO vs IPO for the full comparison.
Private Stock vs Public Stock
The same claim on a company. What differs is access to information and to buyers
As of October 2026 · SEC Investor Bulletin (02.2013); 17 CFR 230.144. US rules only.
Common Mistakes with Private Company Stock
- Valuing common at the round priceThe round price buys preferred stock with a preference. Common stock is worth less until every preference is covered.
- Treating options as sharesAn option is a right to buy. It costs the strike price to exercise and may trigger tax.
- Missing the 83(b) windowYou have 30 days after a grant of restricted stock. After that, the election is gone.
- Selling without the companyA sale that skips the right of first refusal or the company’s consent can be void.
- Expecting dividendsGrowth companies rarely pay them. The return, if any, comes at an exit.
Private company stock is real ownership with three limits: no daily price, few chances to sell and a company that controls transfers. Check all three before you count the shares as money.
The Terms This Page Uses
- Private company stock
- Shares in a corporation whose stock does not trade on an exchange. The company controls who may own it.
- Common stock
- The basic class of shares, held by founders and employees. It is paid after preferred stock.
- Preferred stock
- The class investors buy in funding rounds. It is paid first at a sale, up to its liquidation preference.
- Cap table
- The record of who owns which shares, options and other claims on the company.
- Right of first refusal
- The company’s or its investors’ right to buy shares on the same terms before an outside buyer can.
- 83(b) election
- A filing with the IRS, due within 30 days of a grant of restricted stock, to be taxed on the value at grant.
- Rule 701
- The SEC exemption that lets private companies grant equity to employees without registration.
- Tender offer
- An offer to many holders to buy their shares at one price within a set window.
- 409A valuation
- An independent appraisal of a private company’s common stock, used to set option strike prices.
What People Ask About Private Company Stock
Where Every Figure on This Page Comes From
Figures were last checked on October 21, 2026. Rules are cited for the United States and, for corporate law, Delaware. Each company’s charter and plans set the rights attached to its shares.
- 01US Securities and Exchange Commission09.22.2025Exchange Act Reporting and Registration — Section 12(g) thresholds, employee-plan holders excluded from the count
- 02Cornell LII · 17 CFR 230.701Current ruleRule 701 — eligible issuers and recipients, 12-month limits, $10M disclosure threshold, resale 90 days after reporting
- 03Cornell LII · 26 U.S.C. 83Current lawSection 83(b) election within 30 days of the transfer
- 04State of Delaware · 8 Del. C. §202Current lawRestrictions on transfer of securities: notice, prior opportunity to acquire, consent, designated persons
- 05State of Delaware · 8 Del. C. §170Current lawDividends out of surplus or net profits
- 06Cornell LII · 17 CFR 230.144Current ruleHolding periods of six months and one year
- 07US Securities and Exchange Commission02.2013Investor Bulletin: Investing in an IPO — lock-ups typically 180 days
- 08CartaQ2 2025VC secondary trends — $61.1B of venture secondary volume against $58.8B raised in all venture-backed IPOs
- 09CNBC02.24.2026Stripe valued at $159B after a tender offer, in its sixteenth year as a private company
This page explains how a market works. It is not investment advice, not a recommendation of any security, strategy or company, and not an offer to sell or a solicitation to buy anything. Private companies may never list or be acquired, positions in them can be illiquid for years, and the entire amount invested can be lost. Figures are accurate as of the dates shown and change. Requirements for investor status, and the tax treatment of a private holding, differ by jurisdiction — the jurisdiction is named wherever this page discusses either. Prepared by the AXEVIL Capital research team. Tax rules described here are United States federal rules unless another jurisdiction is named; they change every year and depend on your own facts. Nothing here is tax advice — take your documents to a qualified adviser.
What closed on the private market in the past two weeks
The rounds that priced, the tender offers that opened and the listings that filed — with the structure of each deal and the date on every figure. Written by the team that reads the paperwork.
Where to go from here
Cap tables & term sheetsCommon Stock vs Preferred Stock: Key Differences ExplainedIn a private company, investors buy preferred stock and are paid first in a sale. Founders and employees hold common. Rights, price and payout compared.
Private markets & secondariesWhat Is a Secondary Transaction? Definition, How It Works and ExamplesSecondary shares meaning: existing shares sold by one holder to another, so the company raises nothing. How private-company secondaries work, with an example.
Cap tables & term sheetsWhat Is a Cap Table? Definition, How It Works and ExamplesA cap table lists who owns what in a company: every share class, option and convertible, before and after each round. How to read one, with a worked example.