Tender Offer Guide for Private Company Employees: Selling Shares, RSUs & Stock Options
If you’re an employee at a private company and you’ve heard whispers about a tender offer, you might be wondering:
What exactly is a tender offer?
Should I participate?
How will it affect my taxes?
At Brooklyn FI, we’ve guided hundreds of clients through these transactions. This guide will break down everything you need to know, including timelines, strategies, and tax implications, so you can make an informed decision.
Key Takeaways
Tender offers provide rare liquidity before an IPO.
Selling a small portion can help diversify your finances while keeping upside potential.
Tax treatment varies greatly by equity type—plan ahead, and please call us!
What Is a Tender Offer?
A tender offer is a company-organized opportunity for employees to sell a portion of their vested equity — usually 15–20% — before a major liquidity event like an IPO or acquisition.
It’s different from a casual stock sale because:
It’s typically SEC-regulated and must remain open for at least 20 days.
It happens in one transaction between employees and a small group of investors (often institutional investors).
It’s usually offered to both current and sometimes former employees.
Tender offers often occur when new investors come onboard and major shareholders want to avoid diluting their ownership. Offering liquidity to employees benefits everyone.
Timeline of a Tender Offer
Here’s what to expect:
Announcement – Usually made in an all-hands meeting or via email for former employees.
Tender Opens – You’ll log into a platform like NASDAQ Private Market or Carta to select the shares you want to sell.
20-Day Window – The offer stays open for about three weeks.
Transaction Closes – Once the deal closes, cash proceeds typically arrive in 2–4 weeks.
Taxes Apply – Selling equity is a taxable event. Plan accordingly to avoid surprises.
Should You Participate in a Tender Offer?
Every situation is unique — but here’s what we tell many clients:
Partial liquidity is often worth it — it’s sometimes the only chance to turn paper wealth into real dollars before an IPO.
You still keep 80% of your holdings to participate in future growth.
Waiting for an IPO can take years — and it may never happen.
Strategies for RSUs and Stock Options
Your approach depends on the type of equity you hold:
If you have only RSUs:
Sell up to the allowed percentage (usually 20%).
If you have only NQOs (Non-Qualified Stock Options):
Consider selling these first — proceeds are taxed as ordinary income.
If you have both NQOs and ISOs (Incentive Stock Options):
We often recommend selling the NQOs in the tender.
ISOs lose their preferential tax treatment if exercised and sold in the same day, making them effectively taxed like NQOs.
If you have previously exercised shares:
Take inventory and choose the most tax-advantaged shares to sell.
Make sure you select the correct grant lots on the tender platform — mistakes can be costly.
Tender Offer Tax Considerations
Selling in a tender offer is a taxable event. Here’s what to know:
RSUs & NQOs
Taxed as ordinary income at federal rates up to 37% plus state taxes (often ~50% total in high-tax states).
Subject to Social Security and Medicare tax.
Withholding may be incorrect — get a tax projection to avoid surprises.
ISOs Held > 1 Year After Exercise & > 2 Years After Grant
Qualify for long-term capital gains rates (max 23.8% federal).
State taxes may still apply.
Qualified Small Business Stock (QSBS)
If shares are QSBS-eligible and held > 5 years, you may exclude some or all gains from federal taxes.
Rules are strict — confirm eligibility before counting on it.
Advanced Planning Opportunity
If you have a mix of RSUs, NQOs, and ISOs:
Use the tender to sell certain shares now and free up cash.
Then strategically exercise and hold ISOs to start the clock for long-term capital gains treatment before a future liquidity event.
Always confirm withholding and get professional tax advice.