A founder’s guide to the tender offer

Author: The Carta Team
Read time: 13 minutes
Published date: June 22, 2026

Learn what a tender offer is and how you can use one to provide liquidity for your shareholders, from the strategic benefits to the process for a successful transaction.

What is a tender offer?

A tender offer is a formal, company-sponsored secondary transaction allowing shareholders to sell a certain amount of their company stock at a predetermined price per share. It is a formal offer to purchase some or all of the shares in a corporation from existing stockholders, and is typically structured as an active and widespread solicitation by the company or a third party to buy a substantial percentage of the company’s securities. The buyer can be an individual investor, a group of investors, or the issuing company (in what’s known as a share buyback).

For public companies, the price per share is usually higher than the current market value to incentivize shareholders to sell. For private company stock, the offer price is typically determined by the company and any investors participating in the transaction. In some cases, the offer price may be equal to the company’s most recent 409A valuation.

Given the nature of these transactions, tender offers are often subject to internal agreements, government regulations, and other applicable securities laws.

How tender offers work for private companies

Since private company shares are not available on a public market, shareholders such as founders, employees, former employees, and early investors have limited opportunities to sell their shares. Tender offers have become a popular way to satisfy early investors and reward longtime employees.

• Sellers can monetize their equity and realize returns without having to wait for the company to go public or get acquired.

• If the buyer is an investor, they receive equity in a company they want to invest in.

• If the buyer is the company, it can reduce share dilution while rewarding existing shareholders with liquidity.

Types of tender offers for private companies

There are two primary types of company-initiated tender offers: share buybacks and third-party tender offers.

What is a share buyback?

The primary goal of a share buyback is to provide employees and early investors with liquidity. Buybacks also have the advantage of being less administratively complex than a third-party tender offer. During a share buyback, you can use the cash on your balance sheet to repurchase the outstanding shares.

What is a third-party tender offer?

In a third-party tender offer, the investors have typically already engaged with the company and expressed their interest to purchase shares. Often, executives choose to hold a third-party tender offer if they know, based on investor demand, that an upcoming primary round will be oversubscribed.

How does a tender offer work?

While the process is governed by specific rules, a tender offer is a straightforward event when managed using dedicated liquidity solutions. The details can vary, but in general, the tender offer process looks something like this:

1. A buyer (or multiple investors) offers to purchase a defined quantity of shares at a set price.
2. The company confirms the offer size and price and gets preliminary approval from its board of directors (BoD).
3. The company prepares the disclosures and transaction documents.
4. A 20-business-day window opens for sellers to evaluate the transaction details.
5. Once the offer window has closed, allocations are finalized and sellers receive proceeds for their tendered shares.

Under U.S. Securities and Exchange Commission (SEC) rules, tender offers must remain open for at least 20 business days.

Key participants and their roles

A tender offer involves several key parties:

• The company: Initiates and structures the event.
• The buyer: The entity purchasing the shares (company or third-party investors).
• The sellers: Shareholders who are eligible to participate in the offer.
• The agent: The platform and partner managing the transaction.

Tender offer rules and regulations

In addition to SEC rules, companies will often set qualifying criteria for participating in a tender offer—such as a vesting cutoff date.

Tender offer example

1. A buyer offers to buy shares at an agreed price.
2. The shareholders decide if they want to participate.
3. The transaction is finalized, and participants receive payment.

How to prepare your company for a tender offer

1. Decide who will buy the shares.
2. Set a transaction price based on recent funding rounds.
3. Establish eligibility parameters for shareholders.
4. Consider the tax impact to employees.
5. Understand the potential impact on your 409A valuation.

Why run a tender offer?

A tender offer can help manage your company's ownership structure, reward employees, and provide liquidity to early investors.

Frequently asked questions about tender offers

Is a tender offer a good sign for the company?

Usually seen as a positive signal before an IPO.

What is the difference between a tender offer and an IPO?

A tender offer is private; an IPO is public.

What happens if a tender offer is oversubscribed?

Handled on a pro-rata basis.

Pros and cons of participating in a tender offer

What happens if you don’t accept a tender offer?

No action is needed if you wish to keep your shares.

How are tender offers taxed for employees?

Proceeds may be taxed as ordinary income and/or capital gains; detailed in the "offer to purchase" document.