Structured buyback events where the company or a fund buys shares at a defined price.
A tender offer is announced to eligible shareholders with a defined price, window, and terms. Participants elect how many shares they want to sell within the offer period (subject to any cap). At close, the buyer purchases tendered shares at the offer price. Unlike a secondary sale, the price is non-negotiable: it's set by the organizer. Tender offers are governed by SEC Regulation 14E, which requires the offer to remain open for a minimum of 20 business days, ensuring employees have adequate time to review financial disclosures without coercion.
A company-sponsored tender offer uses the company's own capital or is funded by a new investor as part of a broader round. The company sets the price and terms, and it directly controls dilution and cap table outcomes. A third-party tender offer is organized by an outside fund, though the company must consent to the transfers. Third-party tenders sometimes offer a slight premium above recent 409A pricing to attract sellers, while company tenders are often at or slightly below the last preferred round price as applied to common stock. Regardless of sponsor, the company benefits: tender offers suppress rogue bilateral sales and the 409A valuation volatility they introduce.
For shareholders holding common stock, a tender is a capital gains event, short-term or long-term based on holding period. For option holders, the tender typically requires a same-day exercise-and-sell: the buyer funds the mechanics and the resulting spread is taxed as ordinary income. If you have ISOs, a same-day exercise-and-sell is a disqualifying disposition, eliminating the LTCG benefit. Unvested shares and options are typically not eligible for tender participation.
No. Participation is voluntary. You can choose to tender some, all, or none of your eligible shares. Not participating preserves your equity for a future, potentially higher-value, liquidity event, but the tender price today is certain while the future is not.
The price is fixed by the offer terms, typically benchmarked to the most recent 409A valuation or applied to common stock at a discount to the preferred round price. The uniform price applies to all participants. There is no negotiation.
SEC Regulation 14E governs tender offer timing and disclosure. It requires the offer to remain open for at least 20 business days, ensuring employees have adequate time to review the required financial disclosures and make an informed decision without coercion or artificial time pressure.
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