Equity Compensation · 14 min read

Company Tender Offer: Should I Sell? A Decision Worksheet

The Financial Sciences Company Published Sep 26, 2026

The short answer

A tender offer is a limited-time invitation to sell some of your private-company shares at a set price, and SEC rules require it to stay open at least 20 business days. Whether to sell, and how much, depends on how much of your net worth the stock represents, your cash needs over the next few years, and the tax character of each lot, which turns on the price, who is buying, and how long you have held the shares. Most holders who participate sell a portion rather than all or nothing.

A tender offer arrives with a price, a deadline and a form. It rarely arrives with a way to think about it. This article covers what the offer document is required to give you, how the buyer and the price change the tax result, what happens to incentive stock options and RSU shares that go into the offer, and a worksheet for deciding how much to sell. Tax figures are 2026 federal figures; confirm your own facts with a CPA or tax counsel before you sign.

What is a tender offer, and how long do I have to decide?

A tender offer is a public invitation to sell some or all of a security at a stated price during a stated window, and federal rules require that window to stay open for at least 20 business days. Rule 14e-1 bars any bidder from holding a tender offer open for fewer than 20 business days from the date it is first sent to holders, requires at least 10 more business days after any change in the price or the percentage of shares sought, and requires the bidder to pay for tendered shares, or return them, promptly after the offer ends (SEC Rule 14e-1, 17 CFR §240.14e-1). The SEC staff reads Regulation 14E as applying to tender offers for any securities other than exempted ones, whether or not the company files reports with the SEC, which is why the 20-day clock shows up in private-company offers too (SEC Division of Corporation Finance, Tender Offer C&DI 161.01).

The offer document is the contract. Before deciding anything, read it for six terms: the price per share; which shares are eligible (vested shares only, in most offers); the cap on how much each holder may sell, often a percentage of vested holdings; how the buyer will prorate if too many shares are tendered; whether and until when you may withdraw a tender; and the closing and payment dates. Private-company offers are not subject to the withdrawal and pro-ration rules that apply to registered securities, so the document, not a statute, governs those points.

Who is buying the shares, and why does it matter?

The buyer changes the tax analysis and signals what the next offer may look like. Three patterns:

The company buys its own shares. For tax purposes this is a redemption, taxed as a sale only if it passes a section 302(b) test: not essentially equivalent to a dividend, substantially disproportionate (your voting percentage falls below 80% of what it was, and below 50%), or a complete termination. Otherwise it is a section 301 distribution, which for a company with earnings and profits can mean dividend treatment (26 U.S.C. §302). A small holder selling a fraction of a position usually passes, but the offer document or the company’s tax memo should say so.
Outside investors buy. A negotiated price paid by unrelated investors is the clearest case for capital-gain treatment, though the company still runs the process and influences the price, so the analysis below applies.
A mix. Stripe’s February 2026 offer was reported to include Thrive Capital, Coatue, Andreessen Horowitz and Stripe itself as buyers (TechCrunch, February 24, 2026).

A third-party tender price is also evidence of value, and the company’s next 409A valuation, which sets option strikes and RSU tax values, will take it into account.

Is the money a capital gain or compensation?

For most employees selling vested shares at the same price offered to other holders, the proceeds above basis are a capital gain; the exception is a premium paid to employees over fair market value, which can be taxed as wages. Gross income includes “compensation for services” in any form (26 U.S.C. §61(a)(1)), and neither the Code nor the regulations set out a specific rule for tender premiums, so the question is one of facts and circumstances (The Tax Adviser, October 2025, secondary source). Practitioners generally look at four things (RSM, compensation or capital gain, secondary source):

Factors practitioners use to judge whether tender proceeds are a capital gain or compensation. Compiled from RSM and The Tax Adviser, both secondary sources; there is no controlling regulation on tender premiums.
Factor	Points toward capital gain	Points toward compensation
Price vs. fair market value	At or near the most recent independent valuation, or set by unrelated buyers	Well above the 409A value with no business reason for the premium
Who is buying	Unrelated investors	The employer, or an officer, director or large existing holder
Who may sell	All holders, including former employees and investors, on the same terms	Only current employees, or only a selected group
The company’s role	Administrative	Negotiates the price, picks participants, or books the excess as compensation expense

Fair market value here follows the 409A standard: a reasonable valuation method that weighs asset values, expected cash flows, comparable companies and recent arm’s-length sales, presumed reasonable when an independent appraiser did it within the prior 12 months (Treas. Reg. §1.409A-1(b)(5)(iv)(B)). The practical check: ask the company how it will report the transaction. Any part of the price that lands on a W-2 is compensation at ordinary rates with payroll tax; the rest is capital gain or loss against your basis.

What happens to incentive stock options sold in a tender?

An ISO share sold before it has been held two years from grant and one year from exercise is a disqualifying disposition, and the spread at exercise becomes ordinary income (26 U.S.C. §422(a)(1)). Three cases cover most holders:

Exercised and sold in the same tax year. The spread at exercise is reported as wages, and any gain above the exercise-date value is a short-term capital gain, since the holding period runs from exercise, not grant (26 U.S.C. §1223(5)). There is no AMT adjustment for an exercise whose shares are sold in the same year (26 U.S.C. §56(b)(3)).
Exercised in an earlier year, holding period not met. The same ordinary income arises in the year of sale. The AMT adjustment already happened, so the sale produces a negative AMT adjustment now, which is how the minimum tax credit starts to come back.
Holding periods met. The whole gain over the strike is long-term for regular tax. For AMT the basis is the exercise-date value, so AMT gain is smaller, and the difference lowers tentative minimum tax. The prior-year AMT credit can then be used, up to the amount by which regular tax exceeds tentative minimum tax, with the rest carried forward (26 U.S.C. §53), on Form 8801 (IRS Form 8801). A large tender year is often the year that credit comes home.

Form 3921 from your employer records each ISO exercise with the strike and exercise-date value; keep it with the offer paperwork (IRS Form 3921). For 2026 the AMT exemption is $90,100 single and $140,200 joint, phasing out from $500,000 and $1,000,000 (IRS, 2026 inflation adjustments). For founders and very early employees: selling a lot that might qualify as small business stock before its holding period runs (five years, or three-, four- and five-year tiers for stock issued after July 4, 2025) forfeits the exclusion for that lot (26 U.S.C. §1202(a)(5)).

Which of my RSUs, options and shares can go into the offer?

Only shares you own can be tendered, so the first step is a lot-by-lot inventory of what you hold and how it was taxed.

Shares from settled RSUs. The value on the settlement date was wages, so your basis is that value and the holding period started that day (IRS Publication 525, Stock Options). Lots settled more than a year ago sell at long-term rates; recent lots at short-term rates.
Unsettled RSUs. Most private-company RSUs need a liquidity event to settle, and most offer documents say a tender is not one. If your RSUs have not settled, they usually cannot be tendered. Some companies settle a tranche alongside a tender; the document will say.
Vested options. Some offers let you exercise and sell in one step. For a nonstatutory option, the spread at exercise is wages (IRS Publication 525, Stock Options), and the sale itself produces little or no additional gain. For an ISO, a same-day exercise and sale is a disqualifying disposition, described above.
Shares with restricted transfer. Founder stock, early-exercised shares and shares subject to a right of first refusal have their own rules in the stock plan; the offer document lists what is eligible.

How much should I sell? A decision worksheet

The question is rarely whether to participate; it is how much. The worksheet below turns a yes-or-no question into six numbers.

A decision worksheet for a tender offer. Fill in each line before choosing a number of shares.
Line	What to write down	Why it matters
1. Concentration	Value of all your shares and unexercised options at the tender price, divided by household net worth	The higher the share of your net worth in one private company, the more each sale reduces a risk you cannot otherwise reduce, since you cannot hedge private stock
2. Cash needs	Spending, debt, a home purchase, taxes and reserves over the next two to three years	Money you will need before the next liquidity event should not depend on it
3. Tax character by lot	For each lot: basis, holding period, and whether any of the price will be reported as wages	Long-term lots and any compensation portion are taxed differently, so the lots you choose set the bill
4. Holding-period clocks	ISO two-year and one-year dates; the one-year mark for long-term gain; any small business stock dates	A lot that crosses a threshold a few months after the offer may be worth holding back
5. The next liquidity event	The company’s tender cadence, if any; any stated IPO intentions; the offer’s cap and proration	Whether this is the only exit for years or one of a regular series changes how much needs to happen now
6. Offer mechanics	Price vs. the last 409A value; who is buying; the per-holder cap; withdrawal rights; the deadline	These set what is possible and how the sale will be reported

With the lines filled in, holders tend to land on one of three rules: a fixed percentage of vested holdings at every offer; enough to cover a specific need plus its tax; or enough to bring the position to a target share of net worth over several offers. None is a view on the company. They are ways of deciding once.

A hypothetical holder, worked through

The holder below is hypothetical and the numbers are round. A single filer with $250,000 of salary receives a $40-per-share offer from outside investors, open to all holders on the same terms; the last 409A value was $36, and the company will report none of the price as wages. The holder has 40,000 shares in three lots and $600,000 of other assets, so the stock is about 73% of a $2.2 million net worth at the offer price. The offer caps sales at 40% of vested holdings; the holder sells 15,000 shares, or 37.5%.

Hypothetical, single filer, 2026 federal rules. Tax character per 26 U.S.C. §§422, 56(b)(3) and 1223(5) and IRS Publication 525. Illustrative only; no state tax shown.
Lot	Shares sold	Proceeds at $40	Tax character
A. RSU shares settled in 2023 at $12 (basis $12)	5,000	$200,000	Long-term capital gain of $140,000
B. ISO shares exercised in February 2026 at a $4 strike when the value was $25	5,000	$200,000	Ordinary income of $105,000 (the $21 spread) and short-term capital gain of $75,000; no AMT adjustment, since exercise and sale fall in the same year
C. ISO shares exercised in 2023 at a $4 strike when the value was $10; $20,000 of AMT paid that year	5,000	$200,000	Long-term capital gain of $180,000 for regular tax; AMT gain is $150,000, and the $30,000 difference is what allows the prior-year credit to be used
Total	15,000	$600,000	$320,000 long-term, $75,000 short-term, $105,000 ordinary

The long-term gains stack on the holder’s other income: in 2026 a single filer’s long-term gains are taxed at 15% until taxable income passes $545,500 and 20% above that (Rev. Proc. 2025-32, section 3.03), and the 3.8% net investment income tax applies because income exceeds $200,000 (26 U.S.C. §1411). The ordinary income from lot B lands on the W-2 and may not be fully withheld, so an estimated payment belongs in the plan. After the sale, before tax, the remaining 25,000 shares are worth $1.0 million against $1.2 million of other assets: the position falls from 73% of net worth to about 45%. Whether that is the right stopping point is a household question, not a company question.

What the 2026 mega-tenders tell you, and what they do not

In 2026 several large private companies have used tenders rather than listings to give employees liquidity, which makes the decision recurring rather than one-time. Stripe’s February 2026 offer valued the company at $159 billion, up from $91.5 billion in February 2025, with investors and Stripe itself buying (TechCrunch, February 24, 2026). OpenAI completed a $6.6 billion sale by current and former employees to investors at a $500 billion valuation in October 2025, limited to holders of more than two years (CNBC, October 2, 2025), then in August 2026 bought back about $7 billion of employee shares itself at $852 billion (TechCrunch, August 10, 2026). SpaceX, before its June 2026 IPO, was described by its chief executive as doing “periodic stock buybacks twice a year to provide liquidity for employees and investors” (Fortune, December 6, 2025), and its prospectus reports repurchases of Class A shares after March 31, 2026 at a weighted average of $105.32 per post-split share (SpaceX Form 424(b)(4) prospectus, June 11, 2026).

These facts feed line 5 of the worksheet. A semiannual or annual cadence gives a holder several chances to sell in stages across tax years; a company that has never run a tender may not run another. None of this says what any company is worth or whether any holder should sell; each figure was set by one transaction on one date.

How we approach a tender decision

We start with the inventory: every lot, its basis, its holding-period dates, and how the offer document treats it. That is the foundation of our equity compensation and concentrated stock work, and where most surprises live, especially old ISO exercises and unused AMT credits. Then the worksheet, filled in against the whole household: what the cash is for, which lots cost the least tax per share, and what share of net worth should remain after this offer and the next. The tax side follows our process for planning capital gains after a liquidity event, coordinated with the household’s CPA through tax planning; for executives it sits inside the broader plan described for executives and equity compensation.

Questions worth answering before the deadline

Who is buying, and will any part of the price be reported as wages?
How does the price compare with the most recent 409A valuation?
Which lots are eligible, and what is each lot’s basis and holding period?
Do any ISO lots cross the two-year or one-year mark shortly after the offer closes?
Do I have an AMT credit carryforward, and will this sale let me use it?
What is the per-holder cap, and what happens if the offer is oversubscribed?
What will the 2026 tax bill look like, and is an estimated payment needed?
When is the next likely liquidity event, and what would I regret more: selling this much, or not selling it?

What this does not mean

Nothing here is a recommendation to tender, or not to tender, shares of any company, or a view on what any company is worth; the valuations above are reported transaction figures on specific dates. The Financial Sciences Company is not affiliated with, endorsed by, or sponsored by any company named here; names identify the transactions discussed. Tax outcomes depend on your other income, your state, how the company reports the transaction, and each lot’s history. Treat the figures as 2026 federal illustrations and confirm your own with a CPA or tax counsel before the offer closes.

Frequently asked questions

How long does a tender offer have to stay open?

At least 20 business days from the date it is first sent to holders, under SEC Rule 14e-1, and at least 10 more business days after any change in the price or the percentage of shares sought. The SEC staff applies Regulation 14E to private-company tender offers as well as public ones.

Is the money from a tender offer taxed as a capital gain?

Usually, for vested shares sold at the price offered to all holders. A premium paid to employees above fair market value can be treated as compensation; the factors are the price relative to the last independent valuation, who is buying, whether non-employees may sell on the same terms, and how involved the company is. Ask the company how it will report the sale.

What happens if I sell ISO shares in a tender?

If the shares have not been held two years from grant and one year from exercise, it is a disqualifying disposition: the spread at exercise becomes ordinary income and any further gain is a capital gain, short-term if held a year or less. An exercise and sale in the same tax year produces no AMT adjustment. If the holding periods are met, the whole gain is long-term, and the sale often lets you use a prior-year AMT credit.

Can I tender unvested RSUs?

Generally no. Only shares you own can be sold, and most private-company RSUs do not settle until a liquidity event the plan defines, which usually excludes a tender. Shares from RSUs that have settled can be tendered if the offer document lists them as eligible.

Does it matter whether the company or outside investors are buying?

Yes. A company buying its own shares is a redemption, taxed as a sale only if it passes a section 302(b) test. Purchases by unrelated investors at a negotiated price are the clearest case for capital-gain treatment; a company-paid premium available only to employees is the case most likely to be treated as compensation.

How much of my stock should I sell in a tender?

There is no standard percentage. Holders commonly weigh the share of net worth the stock represents, cash needs over the next two to three years, each lot’s tax character and holding period, the offer’s cap, and how likely another liquidity event is, then set a rule so the decision does not restart at every offer.

Sources and further reading

Next steps

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