Tender Offers Underprice Employee Stock

Tender offers reveal that private market liquidity is still buyer controlled, not market priced. In most programs, one existing insider or a small set of approved investors sets a fixed take it or leave it price, usually anchored to the last round rather than the company’s latest growth. That is why late stage employees often sell below fair value, while the buyer captures the gap between stale private pricing and where the business is actually heading.

• The data shows the mechanism plainly. Across 64 tenders totaling more than $3B, 83% priced at or below the last round, and overall participation was only 37%. Less underpriced tenders got 30% to 50% employee participation, while more heavily underpriced deals fell to 10% to 30%.
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• The reason is structure, not just timing. Most tenders are closed door transactions with an existing major investor or a tightly controlled buyer set. That gives companies control over who gets on the cap table, but it weakens competition and price discovery versus a broader auction or recurring trading program.
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• The underpricing gap can be extreme when a fast growing company is near IPO. Asana employees sold in late 2019 at $15.82, then the stock went public less than a year later at $28. Snowflake employees sold at $38.77 in February 2020, then the stock hit $253 on its first day of trading.
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The market is heading toward more frequent, more competitive liquidity windows with broader investor access and more disclosure. As companies stay private longer, the winning model will look less like a one off insider tender and more like a controlled private market, where employees can sell smaller amounts more often and the share price updates as the business changes.