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IPO delays. Market uncertainty. Equity compensation in flux. If you’re holding private company stock, you might be facing a new kind of decision: whether to sell shares now through a tender offer or hold on in hopes of more value down the road.
It’s not a simple choice. It touches your finances, your goals and maybe even your peace of mind. That’s why understanding how tender offers work — and what they really mean for you — is so important.
Why you’re hearing about tender offers
A tender offer is a chance to sell some of your private company shares. Usually, this means selling vested stock back to the company or to approved buyers. The offer is often available for a limited time and at a set price. Current employees, former employees and even outside investors may be eligible.
These offers are becoming more common. Private companies are staying private longer than expected. For example, Stripe, Databricks and others have postponed their IPOs, leaving many employees holding valuable equity but no clear path to access its value.
For some, a tender offer is a welcome way to create liquidity. For others, it raises important questions: Should I sell now or wait? What about taxes? What happens if I don’t do anything at all?
These are all great questions to ask and ones we hear every day. It’s always easier to make confident decisions when you have a team of professionals by your side, helping you understand your options and align them with your bigger financial goals. But first, let’s share some of the basics so you can feel grounded before making any big decisions.
Tender offer 101: The basics
A tender offer is when your company gives you the option to sell a portion of your vested shares — usually before an initial public offering (IPO), when the company is still private—at a fixed price for a limited time. It’s optional. You can sell some, all or none. And the process is typically facilitated through a platform like Carta or Shareworks, where you can review terms and submit your election.
Unlike an IPO or a secondary market sale, tender offers are private transactions. They’re designed to provide employees with some liquidity while the company remains private. Depending on the size of the offer and who participates, ownership percentages can shift. Control of the company typically stays with founders, early investors or key stakeholders.
Why companies offer tender offers
Tender offers aren’t just generous gestures. They’re strategic moves. Companies may use them to:
- Offer liquidity to retain and reward talent
- Avoid pressure to go public too soon
- Control who owns shares
- Clean up a complicated cap table before an IPO or acquisition.
(A cap table, or capitalization table, is a snapshot of who owns equity in the company. This can include employees, founders and investors. Companies often want to streamline it before raising more capital or going public.)
They may also offer different terms to different groups of employees, which is why it’s important to fully understand your offer and how it fits into your broader financial picture.
Understanding why a company offers a tender offer can help inform whether you should participate. Is the company offering liquidity to retain talent while pushing the IPO timeline? Are they cleaning up the cap table ahead of a major funding round? Or is it a way to let long-tenured employees cash out?
These signals, along with your personal liquidity needs and belief in the company’s future, are the foundation of a well-informed decision.
Should you participate in a tender offer?
There are three key factors to look at when figuring out whether you should participate in a tender offer:
- Liquidity needs vs. growth potential
Selling shares in a tender offer may offer flexibility to support near-term goals, such as a home purchase, tuition or strengthening your overall financial foundation. Holding, on the other hand, could offer more upside if the company performs well over time.
It often comes down to what feels right for your situation. Would you regret missing out on potential growth? Or feel more confident with some cash in hand today?
Thinking through these trade-offs with a trusted advisor can bring clarity and confidence to your decision.
| We help clients think about trade-offs: Would you regret missing out on future growth? Or would you feel more secure having cash in hand now? |
- Tax implications
Proceeds from a tender offer can create a tax bill. You might owe capital gains tax. If you’re exercising or selling ISOs, there could also be exposure to the Alternative Minimum Tax (AMT).
If you hold both ISOs and non-qualified stock options (NQSOs), the tax treatment is different for each. Deciding which shares to sell — and when — can affect what you keep after taxes. A bit of upfront analysis can go a long way toward avoiding surprises.
While it’s often difficult to gift or donate private shares due to ownership restrictions, some people look for other ways to offset the tax impact in the same year. That might include donating appreciated public stock or cash to a donor-advised fund, especially if you’re expecting a large taxable gain.
These strategies work best when they’re part of a broader financial plan — and ideally discussed with a tax professional or wealth manager.
- Timing and Restrictions
Tender offers often come with limitations. These may include lock-up periods that delay when you can sell again, rights-of-first-refusal (ROFR) provisions that limit who can buy your shares, or caps on how much of your equity you’re allowed to sell.
These details can feel technical, but they matter. Especially if you’re timing the sale of shares around a major life event like buying a home, setting up a trust or planning for a large tax payment.
Understanding the terms early gives you more flexibility. It also helps you make decisions that stay aligned with your financial goals.
Because every situation is different, we encourage clients to reach out for personalized guidance. A wealth manager can help you map the pros and cons of selling now versus holding — not just for tax season, but for life.
Common tender offer pitfalls & how to steer clear
Tender offers often show up at busy moments. You might be juggling work, finances and life plans. It’s easy to feel rushed, especially with tight deadlines and complex decisions. Here are a few of the more common missteps to avoid:
- Selling without a clear sense of personal financial goals
- Overlooking the tax implications until it’s too late
- Waiting until the deadline, then rushing the decision
- Assuming the offer signals an IPO is just around the corner
- Skipping a second opinion from a financial advisor
Taking time to pause and reflect — ideally with guidance from someone who understands the intricacies of equity compensation — can help turn a reactive decision into a thoughtful financial step.
A tender offer is one step in the journey
Deciding whether to sell shares in a tender offer is about more than numbers. It’s about what you want your life to look like—now and in the future. We work with clients to align their equity decisions with a long-term financial strategy. That includes retirement planning, education funding, legacy building and peace of mind.
If you’re facing a tender offer, we’re here to help you evaluate your options with clarity and confidence. Not sure whether to sell your shares? Talk with us. Let’s map your next move together.
Related resources:
Equity Compensation Guide to Stock Options, RSUs, ESPPs and Taxes
Deferred Compensation: How High Earners Can Reduce Taxes
Thoughtful IPO Planning: Protect & Grow Your Wealth
5 Expensive Mistakes to Avoid Before and After a Liquidity Event
What to Do with Stock Options: When to Exercise & Tax Planning Strategies
