Tender offers

A tender offer is a structured, company-sponsored window where eligible shareholders may sell up to a capped amount of shares at a fixed price to a designated buyer (outside investors, sometimes the company itself via repurchase).

Why companies run them: reward and retain long-tenured employees who have waited years for liquidity; let early angels or small funds exit cleanly; reduce pressure for rogue marketplace sales that create messy cap tables; in some structures, let new growth investors increase ownership without only relying on primary issuance.

The big idea

A company bake sale with a posted price, a guest list, and a per-person cupcake cap is the picture. If too many people show up, everyone gets a fraction of what they asked for (proration). The analogy breaks on securities law: some structures trigger SEC tender mechanics and a clock on the order of ~20 business days.

Typical mechanics (orders of magnitude as of the mid-2020s; always read your offer docs):

1. Board approves terms: price, max aggregate size, who is eligible, per-person caps
2. Offer documents go out
3. Eligible holders elect how many shares to tender (subject to caps — commonly on the order of 10–25% of vested holdings, highly deal-specific)
4. If oversubscribed, elections are prorated
5. Settlement: cash to sellers, cap table updates, tax reporting

Eligibility varies: current employees only vs alumni; exercised shares only vs options with cashless exercise facilitated into the tender; sometimes early investors included. Read the eligibility schedule before assuming you are in.

Common mistakes

• Assuming you are eligible. Alumni, unexercised options, and small holdings are often out.
• Planning on selling your full election in an oversubscribed tender. Proration cuts you.
• Treating "I didn't sell" as proof of belief. It can also be concentration risk you cannot afford.

Check yourself

The tender is oversubscribed. You elected to sell 20% of your vested shares. What happens?

Elections are prorated. You sell less than 20%, at the stated price, unless the docs say otherwise.

Why run a tender instead of letting everyone sell on a marketplace?

Fixed process, known buyer, company blessing, clearer tax docs, less cap-table mess.

Key takeaways

• Tenders are company-controlled: fixed price, eligibility, caps, possible proration.
• Selling a portion and keeping the rest is a normal, rational default.
• Read eligibility and tax timing before you click accept.

Further learning

A founder's guide to the tender offer (Carta)carta.com

Next, transfer restrictions.