How tender offer proration actually works, and why popular tenders shortchange sellers

A company announces a $20 million tender offer and an employee requests to sell $50,000 of stock, well within any individual cap. It's easy to assume that request will simply be honored in full. In a popular tender, it usually isn't — and understanding why is the difference between planning around a tender realistically and being surprised by the outcome.

Proration, in plain terms

When total seller requests exceed the size of the tender pool, the company doesn't pick winners and losers — it prorates every seller down proportionally. If a $20 million pool receives $35 million in requests, every seller gets roughly 57% of what they asked to sell ($20M ÷ $35M), regardless of how long they've been at the company or how small their individual request was.

Why the most in-demand tenders are the most prorated

Counterintuitively, the companies whose tenders are most sought-after — the ones with the strongest growth story and the most oversubscribed demand — are exactly the ones where an individual seller is likely to get the smallest fraction of their requested sale honored. A company nobody wants exposure to might see its tender undersubscribed, letting every seller sell their full request; a company everyone wants exposure to routinely sees far more requests than the pool can absorb.

What experienced sellers do about it

Sellers who understand proration tend to request more than they actually want to sell, expecting the final prorated amount to land closer to their real target — though this only works cleanly if the company's tender terms don't cap participation at a fixed dollar or percentage limit per seller in the first place. It's also why employees at companies with recurring tender programs, like Databricks, often treat each window as one of several chances rather than a single make-or-break event.

The company's side of the calculation

From the company's perspective, proration is a feature, not a flaw — it lets the company cap total dilution and cash outflow at a known amount ($20 million in this example) regardless of how much demand to sell actually exists, while still giving every eligible seller some liquidity rather than serving requests on a first-come, first-served basis. Seeemployee & founder liquidity for how this fits into the broader tender-offer mechanics.