An initial
investment in a company that provides a certain amount of
equity, with the intent to
buy more of the company at a later date, especially when a certain regulatory hurdle has been met. In the early 1980s, it became relatively common for
bank holding companies to make stake-out investments in out-of-state banks before interstate banking was allowed to any significant extent. This brought stake-out investments under the regulation of the
Federal Reserve, which limited stake-outs to 5% equity. The bank holding companies made these stake-out investments under the assumption that interstate banking would eventually be allowed, which it finally was with the passage of the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994.