Reference · Deal types & structures
Tender offer
A company-organized liquidity event: eligible holders may sell up to a set amount of stock, at one price, to pre-approved buyers, on a defined timeline.
Worked example
A worked example of tender-offer proration (illustrative figures):
- A company sets aside a $20 million tender pool and invites eligible employees to submit sell orders up to a per-person cap.
- Total requests come in at $35 million — the tender is oversubscribed 1.75x relative to the $20 million pool.
- The company prorates every seller down to roughly 57% of what they requested ($20M ÷ $35M). An employee who wanted to sell $100,000 of stock is able to sell about $57,000, and keeps the rest for the next window.
- Proration is the single biggest reason a tender offer's advertised size doesn't match what any individual seller actually gets — always check whether a tender is likely to be oversubscribed before assuming you can sell your full requested amount.
Where this trips people up
Sellers routinely plan around the headline pool size and forget proration. If the tender is oversubscribed, everyone is scaled back, and a plan that depended on selling a specific amount fails at the last moment. The related error is assuming the price is negotiable; in a tender it is set for everyone, and the only real decision is how much to submit.
Frequently asked
What happens if a tender offer is undersubscribed?
Everyone who submitted usually sells their full requested amount, and the pool may not be fully used. It also tells you something: at that price, holders were not eager sellers.
Should I always sell the maximum allowed?
Not automatically. The right amount depends on how concentrated your net worth is in the company, your tax position, and your view of the business — not on what the cap happens to permit.
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