IPO Delayed Again? Here’s How To Use Tender Offers To Your Advantage
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When the company delays its IPO or stays private longer than expected, that liquidity event can feel indefinitely out of reach. Equity that once felt like a reward can start to feel like a question mark.
If you are a tech executive interested in learning how we can help you claim your financial independence by investing wisely, minimizing taxes, and maximizing your equity compensation, please book a no-obligation call here.
That’s where tender offers come in-structured opportunities to sell part of your stock and realize some cash, even while the company remains private.
Key Takeaways:
- Tender offers give private company execs a way to unlock liquidity before an IPO
- Understanding your company’s motivation helps you make smarter decisions
- Taxes vary depending on your equity type—ISOs, NSOs, or RSUs
- Planning ahead prevents missed opportunities and tax surprises.
What Is A Tender Offer (And Why It Exists)?
A tender offer is a controlled liquidity event where employees and early investors can sell some or all of their shares, either back to the company (a buyback) or to outside investors.
The company sets the rules:
Who can participate (often only vested employees or executives),
How much can be sold, and
At what price?
The offer window usually stays open for about 20 business days, during which you can decide whether to sell or hold. For companies, tender offers keep equity-based compensation programs working as intended—motivating high performers and supporting retention even without an IPO.
Why Companies Use Tender Offers?
- Retain key executives by giving them liquidity.
- Manage investor expectations when IPO timelines shift.
- Control who owns their stock and at what valuation.
For executives, these offers can be a lifeline, turning paper wealth into cash for real-life goals like diversifying investments, funding a home purchase, or planning for taxes.
But here’s the catch: each tender offer is unique, and understanding the company’s goals helps you decide if participating aligns with yours.
Preparing For A Tender Offer
- Confirm your cap table data. Make sure your share counts and exercise history are accurate
- Understand your equity type. ISOs, NSOs, and RSUs are taxed differently
- Review company materials. Learn who’s buying, what the price is, and any limits on sales
- Get tax projections. Selling might push you into a higher bracket or trigger AMT.
Behind the scenes, companies prepare weeks in advance, securing board approval, setting offer prices, and coordinating legal disclosures. You should do the same kind of preparation on your personal side.
The Tax Factor: Don’t Skip This Step
Tender offers can trigger very different tax treatments depending on the kind of equity you hold:
- RSUs: Already taxed at vesting; additional gains are capital gains
- NSOs: The spread between the strike price and the sale price is taxed as ordinary income
- ISOs: Can qualify for long-term capital gains if holding periods are met but exercising may trigger Alternative Minimum Tax (AMT).
Some transactions may even be viewed as compensatory, especially if the sale price exceeds fair market value (FMV). That means income tax withholding could apply.
Bottom line: Work with a financial planner and tax professional to model your after-tax outcome before you sell.
Example: A Common Tech Executive Scenario
Take Lisa, a Director of Product at a Bay Area AI startup. She has 100,000 vested ISOs with a $2 strike price. A tender offer values shares at $30 each.
Ava sells 25% of her shares to capture liquidity for family goals while keeping 75% for future upside. She prepares early, tracking her AMT exposure, confirming eligibility, and coordinating with her advisor to reinvest proceeds tax-efficiently.
By planning ahead, Ava converts some of her equity into meaningful value without giving up her long-term upside.
Alternatives To Tender Offers
Tender offers aren’t the only way to unlock liquidity, but they’re often the most structured. Other paths include:
- Secondary sales: Selling directly to private investors, though company approval is usually required.
- Option lending: Borrowing funds to exercise options before a liquidity event-riskier, but sometimes necessary.
Tender offers, however, keep the company in control while giving executives a compliant, organized way to sell shares.
When the tender offer email lands in your inbox:
- Review your grant documents and eligibility
- Model the tax consequences
- Revisit your personal and financial goals
- Consult a financial advisor who understands private equity compensation.
Tip: A quick “yes” or “no” can cost you more than you think, get advice first.
Your Next Steps:
You’ve worked hard to build your company’s value. Managing this event wisely can help you unlock that value today while preserving growth for tomorrow. Every tender offer is temporary, but the financial impact can last for decades. Book a free consultation call below for a detailed discussion.
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