Why it happens · Employees & founders
Employee & founder liquidity
The most common driver. Equity compensation vests over years, but a company staying private for a decade or more means that value stays on paper the whole time. Employees sell a portion of vested shares — through a company tender offer or a private sale — to cover taxes, buy a home, or simply diversify a net worth that's overexposed to one employer's stock.
Worked example
A worked example of a tender-offer sale (illustrative figures, not tied to a specific real deal):
- An early employee holds 40,000 fully vested shares. The company's last primary round priced stock at $18/share, so the paper value of the full position is $720,000.
- The company runs a tender offer priced at a 12% discount to the last round — $15.84/share — and caps participation at 25% of each holder's vested position, to keep enough equity retention across the workforce.
- The employee sells 10,000 shares (25% of the position) at $15.84, for $158,400 gross. The remaining 30,000 shares stay illiquid until the next tender window, IPO, or acquisition.
- Tax withholding on the spread between the option strike price and the sale price is typically due immediately, which is why employees often need to plan a tender sale around their broader tax picture, not just the headline price.
See every reason a secondary sale happens, or go back tohow a deal actually works step by step.