Tender Offer

TL;DR

A company-organized program letting employees and early investors sell a portion of their shares back to the company or to outside investors at a set price.

A tender offer is a structured liquidity event organized by the company. Eligible shareholders can sell up to a defined cap of their shares at a set price, typically tied to a recent priced round. Tenders are common at growth stages, especially for companies that delay IPO and need to provide employee liquidity.

Tender offers have securities-law and tax implications that require careful structuring. Companies typically run them annually or biennially and limit them to vested employees who've been with the company for a minimum tenure.

Worked example

A pre-IPO company runs an annual tender at $30/share (60% of preferred price). Each eligible employee can sell up to 20% of vested shares. 180 employees participate, selling $42M in aggregate; the company finds investors to fund the buy-side.

Common pitfalls

• Running tender offers too frequently and creating expectation of routine liquidity.
• Setting the tender price too high or too low relative to the 409A.
• Failing to communicate clearly about tax and timing implications.

When this shows up in a pitch deck

Late-stage liquidity planning; not deck content.

Related terms

• Secondary Sale — A sale of existing shareholder stock (founders, employees, or early investors) to a new investor, providing partial liquidity before an IPO or acquisition.
• Right of First Refusal — The right of the company or existing investors to match any third-party offer to buy shares before the seller can transfer them externally.
• Tag-Along Rights — The right of minority shareholders to join a sale by majority shareholders on the same terms, preventing 'cherry-picking' liquidity.
• IPO — Initial Public Offering — the first sale of a company's shares to public investors, transforming the company from private to publicly traded.
• SPAC — A publicly listed shell company that raises capital to acquire and merge with a private company, offering an alternative route to the public markets.

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