If you work at a private company, you may have received a notice from HR: "A tender offer window is now open." What does that mean? And should you participate?
A tender offer is a company-organized liquidity event - a structured opportunity for shareholders (usually employees) to sell shares at a pre-set price within a limited time window. It's the company saying: "We're facilitating a chance for some of you to get liquidity." Unlike a secondary transaction where you initiate the sale and negotiate with a buyer, a tender offer is company-sponsored and the terms are fixed in advance.
Understanding how tender offers work is important because they're one of the few reliable ways to get cash from private shares before an exit event. But they also come with constraints and tradeoffs that matter.
Key concept
Tender offers are company-friendly and shareholder-friendly. They reduce complexity for the company (single transaction, no negotiations) and give employees a rare chance to get liquidity before IPO. The tradeoff: limited flexibility. You sell during the window at the fixed price, or you don't sell at all.
Who Organizes Tender Offers?
Two types of entities organize tender offers:
The company itself. A company might organize a tender offer to repurchase shares from employees. This is a buyback program. The company sets aside capital and buys back shares at a fixed price. Why would a company do this? To manage cap table dilution, to reward employees with liquidity, or to reduce the number of external shareholders before an IPO.
A secondary fund or investor. More commonly, a growth-stage investor or secondary fund partners with the company to organize a tender offer. The investor funds the purchase. The company facilitates. The investor (the actual buyer) purchases shares from all participating shareholders at the same price. This is how Earlyasset Capital and competitors like G Squared, Savano Capital, and others often enter companies - by organizing a tender offer that buys shares from employees and early shareholders.
From the shareholder's perspective, it doesn't matter much who organizes it. The mechanics are the same: fixed price, limited window, fixed pool of available capital.
How a Tender Offer Works
Step 1: Announcement. The company announces that a tender offer is open. An email goes out detailing: the price per share, the total amount of capital available, who is eligible, how many shares each person can sell (if there's a cap), and when the window closes.
Step 2: Eligibility. Not all shareholders are eligible. Tender offers often exclude board members, founders, or early investors (to manage complexity). Employees typically are eligible. Sometimes there are tenure requirements - you must have been with the company for at least 2 years, for example.
Step 3: Participation and limits. You decide if you want to sell. If yes, you indicate how many shares you want to sell - up to any cap the tender offer specifies. Common caps: sell up to 25% of your holdings, or sell up to $500,000 worth, or sell up to 50,000 shares. The cap prevents any single shareholder from absorbing all available capital.
Example
Your company opens a tender offer at $22 per share. You own 20,000 shares (worth $440,000 at the offer price). The tender offer is open for 30 days. Eligible shareholders include all employees with 18+ months tenure. You can sell up to 30% of your shares. That means you can tender up to 6,000 shares for $132,000. The window closes March 31st. You submit your tender. You receive the $132,000. The 6,000 shares are now owned by the fund that organized the tender offer.
Step 4: Proration (if oversubscribed). If total demand exceeds available capital, the company pro-rates. If there's $10M available and $15M of shares tendered, each shareholder gets 67% of what they requested. You asked to sell 10,000 shares - you sell 6,700. This is rare but important to understand.
Step 5: Closing. Legal documents are prepared. Share transfer agreements are executed. The fund or company wires funds. Shares are transferred. Closing typically happens 30-60 days after the window closes.
The Constraints of a Tender Offer
Tender offers are simple, but they come with real limitations:
Fixed price (no negotiation). The price is set before the window opens. You can't negotiate. You either accept it or pass. If comparable secondary transactions are happening at $25 per share and the tender is at $18, you have to decide whether $18 feels like value or a lowball.
Limited window. The offer is open for 30-60 days. Once it closes, you've lost the opportunity. You can't get liquidity the following month at a slightly higher price. The window is firm.
Sell cap. Most tender offers cap how much of your holdings you can sell. Selling 100% of your position isn't usually an option. This forces a "hold some, sell some" decision structure rather than letting you fully diversify.
One-time opportunity. Tender offers may not happen again for years. If you pass on this one and the company's trajectory changes, you might regret it. Or if the company thrives, you regret not selling when you had the chance. The "one-time" nature creates decision pressure.
Potential lockups. Some tender offers include restrictions on future sales. You might be prohibited from selling the remaining shares for 12-24 months after the tender. This limits your flexibility post-close.
Tender Offer vs. Direct Secondary
How does a tender offer compare to initiating your own secondary transaction (like with Earlyasset Capital)?
Tender offer: Speed (30-90 days total), simplicity (no negotiation), but inflexibility (fixed price, limited amount). Good for people who want fast liquidity without hassle.
Direct secondary: Slower (60-90 days), requires negotiation, but more flexible (you can negotiate price, sell any amount up to your holdings). Good for people willing to invest time for better pricing or control.
In practice: a tender offer might offer $18 per share take-it-or-leave-it. A direct secondary buyer might offer $16 but let you negotiate to $20. Or vice versa. The point is: tender offers prioritize speed and certainty, direct secondaries prioritize flexibility and control.
How to Evaluate a Tender Offer
Is the price fair? Get a sense of what your shares are worth independently. Use Earlyasset's free price tool. Look at recent primary round valuations. Compare to reported secondary transactions. If the tender is at $15 and your recent Series C was at $30, either the company has deteriorated or the tender is structured as a steep discount. Understand the gap.
What is the total opportunity? Don't just look at the per-share price. Look at total capital available. If there's $5M available and 100 eligible employees want to sell $50M worth, you're probably getting prorated hard. If you wanted to sell 10,000 shares ($150,000) and capital is allocated pro-rata, you might only get $30,000. Know how much of your desired sale will actually go through.
Is this likely to be the only chance? Ask yourself: will there be another tender offer in 1-2 years? If the company is growing fast and well-funded, probably yes. If the company is in a cash-constrained position, this might be it. The likelihood of future opportunities influences how urgent this decision is.
What restrictions come after? Read the fine print. Are you locked up from selling remaining shares? For how long? Will you be able to participate in future tenders? Some tender offers give preferential access to participants in round two. Understanding post-tender restrictions matters.
How much do you actually want to diversify? Even if the tender is at a fair price, you need to want the liquidity. If you're happy holding 100% in the company, don't force a sale just because a tender opened. If you've been wanting to diversify and this is your chance, participate.
⚠️ Common mistake: feeling obligated to participate just because a tender opened. Tender offers create FOMO - fear of missing out on the only opportunity. But if the price isn't compelling and you don't need the cash, skipping is rational. Conversely, if you've been waiting for liquidity, don't overthink it - take the opportunity.
When a Tender Offer Makes Sense
You need near-term liquidity. You want to buy a home, diversify, or fund another investment. A tender offer delivers cash in 60-90 days with minimal effort on your part.
The price is reasonable. You've checked the valuation independently and the tender price feels fair relative to recent rounds and secondary comps.
Concentration is high. Your shares are a large percentage of your net worth. A tender at a reasonable price is a rare chance to de-risk without waiting for an IPO.
Conviction is neutral or declining. You're not betting on 10x upside. You think the company has solid prospects but aren't willing to wait 10 years to realize it. A tender lets you lock in value.
The company is signaling health. A tender offer - especially one funded by a professional secondary buyer - is a signal that the company is stable and investor-backed. It's not a desperation move. It's a structured transaction. This is positive.
When you see a tender offer announcement land in your inbox, the first question isn't "should I participate?" It's "is this a good price at the right time?" Answer that honestly using the framework above, and the decision usually becomes clear.
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Price estimates are provided for informational purposes only and do not constitute financial, investment, or legal advice. All transactions respect the company's right of first refusal (ROFR) and any transfer restrictions in your equity agreements. Direct liquidity is provided by Earlyasset Capital, LLC, a separate entity from Earlyasset, Inc.