In recent years of the AI boom, the secondary market for stakes in high-growth private companies has expanded substantially.¹ Valuations on the most prominent names have reached record levels, long-awaited IPO activity is now picking up, and a number of major names have listed or are on a visible path to public markets in the US and internationally. In this environment, the mechanics of pre-IPO secondary deals have become a subject of serious discussion.

Luxembourg is among the jurisdictions encountering these arrangements, most recently in relation to investments in US private technology companies. Beyond the risks inherent in the underlying asset transfer, significant risks are also often buried in the acquisition structure itself. These risks are compounded by the cross-border nature of these investments.

This guide addresses how these structures work, what investors actually acquire through them, and the due diligence that can substantially mitigate the structural risks. We focus on the questions that matter most before committing capital.

What Is an SPV  

Traditionally, investing in a high-growth private company before it goes public was practically out of reach for anyone outside a handful of venture funds and big-name investors. A retail investor would wait for the IPO, which would arrive within a relatively predictable timeframe as part of the normal business cycle. That changed as credit became more available and other factors made it unnecessary for high-growth companies to raise from public markets. As a result, those companies began staying private for longer which created a new imbalance: early investors and employees who had received equity as compensation were sitting on illiquid holdings with no straightforward path to realizing value outside of a public market exit, in part because the companies themselves had strong incentives to control who held their shares and to limit secondary transfers. For investors who wanted pre-IPO exposure but could not access the cap table directly, demand was equally unmet. This is how SPVs became relevant: they became a connector between employees and early investors seeking liquidity on one side and buyers who cannot get in any other way on the other.²

An SPV in this context is a single-asset holding entity that pools capital from multiple smaller investors to obtain exposure to the cap table of a large private company. Unlike a diversified fund, an SPV holds one position. Unlike a direct investment, the investor does not hold shares in the target company directly but instead holds an interest in the SPV, which, in turn, holds the shares in the target company. In practice, the arrangement can consist of multiple SPVs sitting between the investor and the target company for reasons ranging from regulatory structuring and sponsor intermediation to access constraints and sometimes, simple historical accumulation through successive secondary transactions.

Why Luxembourg SPV Matters

Luxembourg’s involvement is not accidental. For cross-border transactions with a European investor base or an EU structuring nexus, Luxembourg has become a natural intermediate layer that combines a flexible company law framework, a broad tax treaty network, a deep toolbox of vehicle types, high legal predictability and a well-developed service infrastructure with the presence of many of the key sponsors and intermediaries already active in this market.

In practice, when we see SPV stacks involving Luxembourg, the local vehicle is most commonly either an SCSp or an SARL. Other corporate legal forms (such as the SA, SCA, and SCS) exist and are occasionally used, but less commonly in this context. The choice reflects the sponsor’s priorities more than any structural necessity.

• SCSp (société en commandite spéciale): The natural choice for a sponsor-led structure. It resembles a common law limited partnership familiar to institutional counterparties with a general partner managing the vehicle and limited partners as passive investors. The SCSp is tax transparent, meaning investors are taxed at their own level rather than at the vehicle level, which matters for cross-border structures with varied investor bases. Its defining strength is contractual freedom: the statute imposes very little, and the partnership agreement can be tailored precisely to the deal: institutional investors value the SCSp exactly because it can replicate any protection they are used to negotiating. The corollary is that the agreement is where investor protections live, so its quality is what matters. If there is a Luxembourg SPV in an SPV stack and the sponsor has any institutional background, it is most likely an SCSp.

• SARL (société à responsabilité limitée): The lean option: one entity, standardized documentation, predictable running costs. Its statutory transfer restrictions share transfers require shareholder approval can make it appropriate for tighter club-deal arrangements where the investor base is small and known. Its statutory framework works in the investor's favour: transfer approval, voting rights, and qualified-majority protection against changes to the articles apply as a matter of law, whatever the documentation provides. Where the SCSp offers freedom to tailor, the SARL offers protection by default: two complementary answers from the same toolbox.

This flexibility places a premium on proper legal structuring: the forms are proven, and outcomes depend on how carefully they are deployed.

What Does the SPV Actually Own?

This is the first and most important question, and it is frequently left unanswered in investor materials. The answer depends on several factors, including whether the structure is a single SPV or a stack, the extent to which the target company’s stock is restricted, and which rights are available to the direct stockholder to begin with.

One caveat at the outset: the interest in question is not necessarily equity at every level. What an SPV holds in the target, or in another entity above it, may be shares, a contractual right to another holder's economics, a debt instrument, or, at the furthest remove, a purely synthetic product (forwards, structured notes, tokenized interests) offering price exposure with no share position behind it. This guide addresses chains built on equity, including contractual rights that pass through the economics of an underlying share position; debt instruments and synthetic products, although they can resemble equity exposure in certain ways, raise distinct questions and are not covered here. What matters for present purposes is that every protection discussed below is only as strong as the weakest link in the chain.

Single SPV or a Stack

There is a meaningful difference between an SPV that is itself a shareholder of record in the target company, what practitioners call a direct SPV, and an SPV that holds an interest in another entity, which in turn holds (or claims to hold) an interest in the target. The Luxembourg SPV is almost always the latter type, known as the SPV stack (or “layered SPV”) model, and it is where most of the structural risk concentrates.

SPV Stack Makes Rights Thinner  

A typical SPV stack looks like this: SPV 1 sits closest to the target, incorporated in a jurisdiction chosen for permissive private company governance, with Delaware being a common example, though equivalent structures appear in other transaction geographies. SPV 2 is the entity into which investors commit capital. Further intermediate layers are not uncommon.

Each layer adds distance and shifts the legal picture. If the investor holds equity in SPV 2, legal protections vary by vehicle type and the laws of a particular jurisdiction. The value of that equity depends on what SPV 2 holds. And SPV 2’s exposure to the underlying target is most commonly indirect: a contractual right to participate in the economics of SPV 1’s position rather than direct ownership of the target itself. The investor’s legal claim runs against SPV 2 only. If the asset is restructured or disposed of at SPV 1 level, there is no direct remedy and no recourse to the target.

These arrangements can run considerably deeper than a two-layer structure, and the deeper they run, the further the investor sits from direct economic ownership of the underlying asset.

That thinning is not limited to distance from the target, it also extends to exit. Multi-tier structures can obscure what an investor actually receives, because each layer can only distribute once it has received from the layer above it.

In Practice: When SpaceX made its public debut in June 2026, investors in lower-tier SPV layers were left unable to determine their actual share entitlement: distributions cannot begin until the company's rolling lock-up periods lift, and for the bottom layers of the deepest structures the wait is expected to run many months beyond the IPO.³ A single-tier structure does not eliminate lock-up risk, but it removes this particular source of delay, since no intermediate layer sits between the investor and the distribution.

Transfer Restrictions Over Target Stock

Transfer restrictions on secondary transfers of target stock are not a new phenomenon. The secondary markets that developed around companies like Facebook and Uber before their respective listings (in 2012 and 2019, respectively) generated the same tension between issuer control and investor appetite for liquidity. What has changed is the aggressiveness of issuer responses in the AI boom era: in early 2026, Anthropic published a transfer restriction policy, updated several times since⁴, that takes a notably hard line, treating unauthorized transfers, including through SPVs, as void from the outset, not merely defective. By way of further example, Anduril has taken a comparable position.⁵ This risk sits with whichever entity first acquired the shares from the seller (SPV 1 in a stack, or the SPV itself in a direct structure) and applies regardless of how many layers sit above it. If that original transfer is void, everything built on top of it is worth nothing, however many entities separate the investor from the target.

Common v Preferred Stock

Beyond the ownership chain, the nature of the underlying interest matters enormously. Many secondary SPVs are built around common stock, often sold by employees or early investors seeking liquidity. Common stock sits at the bottom of the liquidation preference stack. It has no conversion rights, no anti-dilution protection, and no priority in a sale or wind-up. The institutional funds that negotiate hard for preferred stock with full-ratchet anti-dilution protections are not buying what these SPVs are selling. That difference is rarely prominently disclosed.

Dilution

Finally, dilution. Private companies at late stages raise further capital in subsequent rounds, and each new round reshuffles the cap table. Anti-dilution provisions, standard in institutional venture investment, protect existing investors from the worst effects of that reshuffling. The first question is simply whether the entity holding the target stock – a single SPV, or SPV 1 in a stack – has any such protection at all; many secondary sellers hold common stock with none.

Where a stack is involved, there is a second question: even if SPV 1 has anti-dilution rights, it is frequently unclear whether they flow through to SPV 2, and whether the investor in SPV 2 has any protection at all. A single-tier structure avoids this second layer of uncertainty, but not the first.

Who Controls the SPV and Whose Interests Are Served?

Governance in these structures revolves around one person or entity: the sponsor. The sponsor establishes the vehicle, sources the interest in the target, sets the price, decides who can invest, determines the fee structure, and makes all significant decisions about the vehicle's operations and eventual exit. In an institutional fund structure, that concentration of power is balanced by a regulatory framework, a regulated manager, and negotiated investor rights. In an unregulated SPV, there is often nothing to balance it.

The key questions are straightforward, but the answers are not always forthcoming:

• Does the sponsor have a verifiable track record in this asset class? Can you verify their claimed connection to the target company or its cap table?

• Is the sponsor also an investor in the vehicle? Skin in the game matters. A sponsor who takes only fees and carries no economic risk has a materially different incentive structure from one who has committed their own capital.

• Is the sponsor on both sides of the transaction, sourcing the shares and setting the price? Where a sponsor buys an interest and then marks it up before selling it into the SPV, the question of whether the valuation is arm’s length becomes critical and is often unanswerable.

• Who makes the exit decision at the SPV level, and on what basis? If the sponsor controls the timing and terms of any sale or secondary transfer, investors have no independent path to liquidity.

• Is there any restriction on the sponsor scaling the vehicle further by admitting new investors, creating parallel structures, or diluting the existing pool?  

These are not hypothetical concerns. They describe the actual governance reality of many SPV stack structures currently being offered to investors, including through Luxembourg entities.

What Rights Does the Investor Typically Not Have?

In a well-regulated investment environment, for instance, a Luxembourg SPV managed by an authorised AIFM, or even a properly documented co-investment vehicle, investors would expect a baseline of rights as a matter of course. In an SPV stack controlled by an unregulated sponsor, those rights are frequently absent. Not limited or restricted: absent. Some of these gaps are permanent features of the structure. Others exist only because of how the vehicle happens to have been documented, and could in principle be closed.

What No Amount of Drafting Fixes:

• Professional manager oversight: no regulated AIFM, no depositary, no regulatory obligation to act in the investor’s best interest. This follows from choosing an unregulated vehicle in the first place, not from any specific drafting choice.

• Diversification: none, by design. Single-asset vehicles cannot diversify risk; that concentration is a commercial feature, not a regulatory safe harbour (see the AIFMD discussion below), and it means full exposure to one outcome regardless of documentation.

• Liquidity: no guaranteed liquidity mechanism, no put option, no redemption right, no secondary market. If the target does not IPO and is not acquired, the investor may hold an illiquid position indefinitely: a function of the underlying asset, not the paperwork.

• Information at the root: whether the target company grants any information at all (audited accounts, cap table access, performance updates) to whichever entity holds its stock is set at the time that entity acquired its position, and for common stock acquired via secondary transfer, it is frequently nothing.

• Anti-dilution at the root: whether this protection exists at all depends on the type of stock and the terms of the original transfer. Where it is absent at the root, it cannot be created downstream.

What Depends on the Documentation:

• Voting and consent rights: no meaningful vote on material decisions. If the sponsor decides to restructure the vehicle, change the fee arrangement, or accept new investors, the existing investor base typically has no veto. This is purely a function of what SPV 2’s own constitutional documents provide, independent of anything above it.

• Information pass-through: where the target has granted some information to the entity closest to it, whether that flows down to the investor is a separate, and separately negotiable, question.

• Anti-dilution at SPV 2 level: investors should look for explicit safeguards against further investor admission in SPV2’s constitutional documents. Absent those safeguards, there is no floor.

• Exit-related terms: within the constraint that no liquidity mechanism exists, certain protections can still be negotiated: a defined sunset or wind-up clause, tag-along rights if the sponsor transfers its position, a right of first refusal on secondary transfers of SPV interests, and minimum reporting obligations tied to exit-relevant milestones.

• Fee clarity: management fees, carried interest, arrangement fees, and ongoing administration costs can collectively represent a significant drag on returns; whether they are disclosed in a single consolidated document, and whether the sponsor’s role as valuation agent is transparent, depends entirely on what has been documented.

What you have, in the most common version of this structure, is an interest in a Luxembourg entity, carrying whatever rights its legal form and its documents provide, whose entire value depends on that entity's contractual claim against an entity in another jurisdiction that may or may not hold the interest you were told it holds. Some of the gaps above are permanent. Others are simply undocumented, which is exactly where due diligence and negotiation come in.

When an SPV Stops Being an SPV: The AIFMD Perimeter

Unregulated status can be achieved through structuring, but not through labelling: classification follows from what the vehicle actually is and does. A vehicle is an Alternative Investment Fund under Article 4(1)(a) AIFMD, applied in Luxembourg through the Law of 12 July 2013 on alternative investment fund managers, under CSSF supervision, if it cumulatively (i) is a collective investment undertaking that (ii) raises capital from a number of investors (iii) to invest it in accordance with a defined investment policy and (iv) for the benefit of those investors. The label on the vehicle is irrelevant, and the legal position on single-asset SPVs is not settled, which is precisely why the analysis cannot be skipped. Two limbs of the test are routinely misstated in sponsor materials.

The Capital-Raising Limb

For the syndicated structures described in this guide, this limb will usually be satisfied. Under ESMA's guidelines⁶, a single fundraising round suffices, a vehicle whose documents do not prohibit more than one investor is treated as raising capital from a number of investors, and underlying investors behind a nominee are relevant to the analysis.

A Single Asset Does Not Mean No Investment Policy

A mandate to acquire and hold shares in one named company is capable of satisfying the factors ESMA identifies, and the absence of ongoing portfolio management goes to who the manager is, not to whether the vehicle is a fund.

In practice, certain features point towards the perimeter:

• A series of SPVs: parallel or successive single-deal vehicles may be treated as evidence of a collective investment strategy.

• Residual sponsor discretion: rights to substitute the target, reinvest proceeds, or decide how capital is deployed.

• An open investor base: continued admission of investors after the initial closing.

• Fund economics: management fees and carried interest do not trigger the test, but signal an investment service rather than a one-off acquisition.

Classification Is Not a Cliff Edge, If Asked in Time

Many single-deal vehicles legitimately sit outside the perimeter, and where a vehicle is an AIF below the €100 million (leveraged) or €500 million (unleveraged, closed-ended) thresholds⁷, the consequence is registration and reporting rather than full authorization – a proportionate regime handled routinely in Luxembourg. The problematic case is the vehicle that is a fund in substance but has never confronted the question: potential regulatory intervention, marketing conducted in breach, and fund-level exposure without fund-level protections. For the investor, the sponsor's handling of this question is diligence information in of itself.

Nor is the perimeter question a Luxembourg or EU idiosyncrasy. Most major jurisdictions draw their own line between a passive holding vehicle and a regulated collective investment undertaking, each with its own test and its own consequences. In a multi-tier structure, this means each layer must be assessed under the law of its own jurisdiction, the analysis of the Luxembourg entity does not answer the question for the layers above it.

Managing the Structural Risk: Due Diligence Beyond the Target Company

Investors in SPV sponsors usually commission research on the target company: revenue projections, market share, competitive positioning, likelihood of IPO. That analysis is valuable, but it addresses only part of the risk. The structural risk (the risk that you are not getting what you paid for even if the company performs exactly as expected) requires a separate layer of diligence focused on the SPV itself, and, where a gap turns out to be fixable rather than structural, a view of what to ask for before signing.

Before committing capital to any such structure, investors should be in a position to answer the following:

• Is the SPV into which the investor subscribes (the entry vehicle) itself on the cap table of the target, or is its interest indirect, held through one or more intermediate entities? If indirect, what does each intermediate entity actually hold? Where the structure is indirect, ask for direct sight of SPV 1's own constitutional documents and its position in the target, visibility into the layers above, even without control over them, is worth negotiating for.

• What type of shares does the vehicle hold in the target: common or preferred? What liquidation preference and anti-dilution provisions apply to those shares? Where SPV 1 does hold anti-dilution protection, confirm SPV 2’s documents provide for pro-rata flow-through – this is often silent by default.

• Has the underlying transaction documentation (the transfer agreement between the seller and SPV 1, the constitutional documents of SPV 1, and any side letters) been reviewed by independent legal counsel? This is where information pass-through obligations and voting or consent rights, or their absence, actually get confirmed.

• Who is the sponsor, what is their verified track record, and do they have economic exposure to the same investment on the same terms?

• What are the full fees (upfront, ongoing, and on exit) and are they disclosed in a single consolidated document?

• What is the stated exit strategy and timeline, and what happens if it is not achieved within that period? Where there is no defined sunset or wind-up clause, tag-along rights, or a right of first refusal on secondary transfers of SPV interests, these are worth negotiating for before committing.

• What is the legal form and status of each entity in the chain, from the vehicle closest to the target down to the entry vehicle? For the Luxembourg SPV specifically: which vehicle type is being used (SCSp, SARL, or other), has it been validly incorporated and registered, is it free of insolvency or striking-off proceedings, and who actually manages it? The service providers are a data point in themselves: domiciliation is a regulated activity in Luxembourg, reserved to supervised professionals, so the identity and regulatory status of the domiciliation agent and any administrator speak to the quality of the structure.

• Has the structure been reviewed for regulatory compliance? Specifically, does it remain within the unregulated holding vehicle perimeter or does it constitute collective investment activity requiring authorization? Test it against the factors discussed above: is the investor base closed, is the single asset hard-wired into the constitutional documents, are there substitution or reinvestment rights, and is the vehicle one of a series?

These questions are not exhaustive. They are a starting point. The absence of clear, documented answers to any of them is itself due diligence information.

When These Structures May Be Appropriate

Luxembourg SPVs are well-established tools, with a mature legal framework, a broad tax treaty network, and a deep service provider ecosystem built over decades of cross-border structuring work. Their track record is not the issue. The issue is rigour in application: the same flexibility that makes these vehicles efficient when properly structured also makes them easy to misuse when they are not.

The honest starting point is that most investors in the pre-IPO SPV structures cannot negotiate. Allocations are oversubscribed, the documents are presented as final, and the real choice is rarely "on what terms" but "in or out". What the investor actually controls comes down to three decisions: whether to enter, at what size, and with what understanding.

That is why appropriateness is not a property of the deal, it is a property of the match between the structure and the investor. The test is whether the investment still makes sense when evaluated as what it legally is: an illiquid interest in an entity the investor does not control, with no guaranteed path to liquidity and, frequently, junior economics at the root, rather than as what it is marketed as, shares in a household-name company. An investor who would still commit at that price and that size, having understood every layer, is making an informed private markets allocation. An investor who commits because the name is famous and access feels scarce is taking the same risks without the compensation of understanding them.

Where a single sponsor controls every layer of the stack, there is at least one party with full visibility across the structure – though this also concentrates the conflicts of interest described earlier in one pair of hands. Where control is fragmented, those conflicts may be diluted, but the gaps between layers become the investor's problem. Neither model is inherently safer; they demand different diligence.

Structural changes over the life of the vehicle, including further scaling by the sponsor, can also alter its regulatory classification: as discussed above, a structure that begins outside the AIFMD perimeter does not stay there permanently.

The Bottom Line

The problem is not the structure. It is the gap between what investors believe they are buying and what they are actually acquiring – a contractual interest in a holding entity, at the end of a chain, with limited rights, uncertain protections, and no guaranteed path to liquidity.

Understanding the structure through which you invest is as important as understanding the underlying asset. In the SPV stack context, those two analyses are not supplementary, they are both necessary conditions for an informed investment decision.

For guidance on evaluating SPV structures before committing capital, reviewing Luxembourg vehicle documentation, or mapping the full ownership chain in a specific transaction, contact us to discuss how these considerations apply to your situation. We regularly advise investors and sponsors on Luxembourg structuring across SCSp, SARL, and other vehicle types, and work closely with local and cross-border specialists to ensure no blind spots in due diligence.

Footnotes

¹US venture secondary transaction value reached $106.3bn in 2025 (PitchBook, 2025 Annual US VC Secondary Market Watch - https://pitchbook.com/news/reports/2025-annual-us-vc-secondary-market-watch); global secondary volume across all private markets exceeded $240bn (Jefferies, Global Secondary Market Review, 2025 –  https://www.jefferies.com/insights/the-big-picture/2025-global-secondary-market-review-another-record-breaking-year/); by Q1 2026 the annualised US pace of $112.2bn had surpassed public listings as a liquidity channel for the first time (PitchBook, Q1 2026 US VC Secondary Market Watch - https://pitchbook.com/news/reports/q1-2026-us-vc-secondary-market-watch).

²According to Caplight data, SPVs grew from 13% of VC secondary trade volume in early 2023 to roughly 40% by 2025 (Caplight, "Q3 2025 Market Update", October 2025 - https://www.caplight.com/insights/q3-2025-market-update).

³See "SpaceX SPV investors won't know their true holdings until post-IPO lock-ups lift", TechCrunch, 11 June 2026 – https://techcrunch.com/2026/06/11/spacex-spv-investors-wont-know-their-true-holdings-until-post-ipo-lock-ups-lift/.

⁴Anthropic, 'Unauthorized Anthropic stock sales and investment scams', support notice, originally published on 11 February 2026 and periodically updated since – https://support.claude.com/en/articles/13704655-unauthorized-anthropic-stock-sales-and-investment-scams.

⁵Anduril has published comparable warnings: transfers not authorized by its board are void, and forward contracts or similar arrangements circumventing its transfer restrictions 'may have no value at all' (Anduril, Investor Relations –  https://www.anduril.com/investor-relations).

⁶ESMA, Guidelines on key concepts of the AIFMD, ESMA/2013/611, 13 August 2013 – https://www.esma.europa.eu/sites/default/files/library/2015/11/2013-611_guidelines_on_key_concepts_of_the_aifmd_-_en.pdf.

⁷Art. 3(2) AIFMD; Art. 3(2)–(3) of the Luxembourg Law of 12 July 2013.

Disclaimer: Library articles are provided for general information purposes only and do not constitute legal advice. Accessing or relying on them does not create a lawyer-client relationship. Readers should seek advice on their specific circumstances before acting.