A tender offer is a time-bound invitation for shareholders to sell a defined class of stock to the company or an approved purchaser at a stated price.

How it works

Late-stage private companies run tender offers when a new primary round or secondary investor sets a reference price. The board approves size, eligibility (often employees, founders, early angels — sometimes all holders pro rata), and whether the company or a lead investor funds repurchases. Participants tender shares; the offer may be oversubscribed and prorated.

Securities rules matter: Rule 701, Form S-8, and tender offer regulations can apply depending on structure and buyer identity. Companies coordinate with counsel on blackout periods, 409A valuations, and tax withholding for employees. Price usually tracks or discounts the latest preferred round valuation.

Why it matters

• Founders: Tender offers aid retention and morale but signal who can sell and who cannot — cap table politics require clear communication.
• Investors: Partial liquidity improves fund metrics without forcing an exit. Lead investors may participate as buyers to consolidate ownership.

Common mistake

Announcing a tender offer before legal and tax frameworks are ready. Employees who sell without understanding AMT, QSBS timing, or exercise requirements can face unexpected tax bills.

Related ideas

See also tender offer program, tender offer exit, liquidity event, and secondary sale.