Underpriced Tender Offers Hurt Employees

This is less an employee benefit than a pricing loophole for insiders. In most private company tenders, the buyer is an existing major investor or company approved counterparty, the price is anchored to the last round instead of current growth, and employees decide whether to sell with no real bidding war to push the price up. That setup lets sophisticated buyers accumulate common shares cheaply from holders who need cash sooner than the company needs true price discovery.

• The pattern in the data is broad, not anecdotal. Across 64 tender offers and more than $3B of volume, 83% were priced at or below the last round, and nearly every tender sat below where the company later traded in a future financing round.
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• Employees are the weakest side of the table. Investor sales made up about 50% of tender transactions on average, employee sales just 33%, and employees were more likely than founders and investors to sell below the last round price. Participation also dropped as underpricing got worse.
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• The mechanism matters. Traditional tenders are episodic, issuer controlled, and one sided on price. Interviews describe them as taking months to run, often ending undersubscribed, because sellers can accept or walk away but do not benefit from multiple buyers openly competing for their shares.
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The next step for private liquidity is moving from fixed price tenders toward recurring, more competitive auctions with broader investor access and regular disclosure. As companies stay private longer, the winners will be the ones that turn liquidity into real market pricing instead of letting incumbent investors keep using liquidity windows to increase ownership on favorable terms.