What Is a Tender Offer? Definition, How It Works and Examples

A buyer announces the terms: the price per share, the most shares it will buy, who is eligible and the date the offer expires. Holders who want to sell submit their shares during the window. They can withdraw them while it stays open. When it closes, the buyer accepts what was tendered up to its cap. If the cap is exceeded, it scales everyone back equally. Then it pays promptly.

The tender offer meaning in law is looser than it sounds. The Exchange Act is the US law that governs securities trading. Neither it nor the rules of the SEC, the US securities regulator, give a tender offer definition. Courts decide whether a purchase program is a tender offer using the eight Wellman factors, named after the court case that listed them. The SEC has said not all eight need be present.

The Tender Offer Test

• Active and widespread solicitation of holders
• Solicitation of a substantial percentage of the company’s stock
• A price at a premium to the prevailing market price
• Firm terms that cannot be negotiated
• An offer contingent on a fixed minimum number of shares, often with a maximum
• An offer open only for a limited period
• Holders put under pressure to sell
• Public announcements of a purchase program before or alongside rapid buying

A private-company liquidity program offers a fixed price to every eligible employee for a set window. That ticks several of these boxes. So companies generally run one as a tender offer and follow the tender rules.

Issuer (self) tender

The company buys back its own shares. A private company uses cash from a round or from its balance sheet. The shares are retired or held, and the company’s share count falls.

Third-party tender

Someone else buys. In a private company, the buyers are usually new or existing investors the company has approved, sometimes alongside the company. The shares change hands, and the company raises nothing.

Hostile tender

A public-market tactic in mergers and acquisitions (M&A). A bidder offers to buy control directly from shareholders over the board’s objection. The board must state its position within 10 business days.

A hostile tender offer is a public-company event. A private company’s shares usually carry transfer restrictions and a right of first refusal, the company’s right to buy the shares first. So an outsider generally cannot buy them without the company’s consent. In the private market, the tender is the company’s own program. The question it answers is liquidity, the chance to turn shares into cash. Control is not at stake.

The Tender Offer Agent

Large tenders appoint an agent, such as a bank, a transfer agent or a private-market platform. The agent sends out the offer documents, collects elections, runs proration and pays sellers. It handles the mechanics. The buyer sets the terms.

The full public-company regime applies only to companies with securities registered under the Exchange Act or reporting under it. That regime includes Rule 13e-4 and its Schedule TO filing for issuer tenders, and Regulation 14D for many third-party bids. A private company is outside it. It is still covered by Regulation 14E. The SEC has stated that Section 14(e) and Regulation 14E apply to all tender offers, for registered and unregistered securities, including those of a private company.

Employee Tender Mechanics

1. 1.0
   AnnouncementThe company names the price, the total size, the buyers and who is eligible. Eligible holders are often current and former employees, with a cap such as a percentage of vested shares, the shares you have fully earned.
2. 2.0
   Offer documentSellers receive the terms, the risks and what the company is disclosing about itself. Read the sections on proration, tax withholding and the price basis.
3. 3.0
   ElectionThe window lasts at least 20 business days. Under the SEC’s April 2026 order, a company’s own cash, fixed-price offer can last 10. Holders elect how many shares to tender. They can change or withdraw that election before the offer expires.
4. 4.0
   Proration and settlementIf tenders exceed the cap, each seller is scaled back. Options are usually exercised, meaning bought at their fixed exercise price, as part of the sale. The exercise price and withholding come out of the proceeds.

A tender price is a transaction in the company’s own stock. So it can feed into the company’s next 409A valuation, the independent appraisal of its common shares. A tender is also one form of secondary transaction. The difference is that the company organizes it for many holders at one price. In a typical secondary, one holder negotiates with one buyer.

A private company announces a tender for up to 2 million shares at $40. Employees may sell up to 25% of their vested holdings. Holders tender 5 million shares. So the buyers take 40% of every tender (2 million ÷ 5 million).

At the large end, the same mechanism runs at the scale of a funding round. Stripe’s February 2026 tender priced the company at $159B in its sixteenth year as a private company. Nasdaq Private Market found that the median gap between employee tenders fell from 899 days in 2022 to 132 days in 2025, a drop of 85%. At the companies that run them, tenders have become a recurring calendar event.

• Counting on the full tenderAn oversubscribed offer is prorated. Plan around the cap and the likely take-up. The number you submit is only a ceiling.
• Ignoring the exercise costOption holders sell net of the exercise price and withholding. The gross figure on the offer is more than the cash you receive.
• Missing the deadlineElections close on the expiry date. A change in the price or the size must leave at least 10 business days open. So check the new expiry date, which can differ from the original one.
• Reading the price as a valuationA tender price is one negotiated transaction, often set against the last round. It is not an appraisal. It says nothing about the price at an IPO.
• Skipping the offer documentIt typically sets out what the company is disclosing about itself, how withholding works and what happens to shares not accepted. Regulation 14E’s anti-fraud duty attaches to that disclosure.

Tender offer

An open offer to many holders to buy their shares at a set price within a set window, usually up to a maximum number of shares.

Self-tender (issuer tender)

A tender offer in which the company buys back its own shares.

Proration

Scaling every seller back by the same percentage when more shares are tendered than the buyer will accept.

Wellman factors

The eight tests courts use to decide whether a purchase program is a tender offer. Not all eight need be present.

Regulation 14E

SEC rules that apply to every tender offer, public or private: minimum offer periods, prompt payment and anti-fraud duties.

Schedule TO

The SEC filing that accompanies a tender offer for a reporting company’s securities. A private company does not file it.

Secondary transaction

Any sale of existing shares from one holder to another. A tender is the company-organized version.

Right of first refusal

The company’s or investors’ right to buy shares on the same terms before an outsider can. It is the reason private-company tenders need the company’s approval.

Rules were checked against the primary source on October 1, 2026. The Stripe and Nasdaq Private Market figures come from the sources listed below, with their dates.