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As we approach the mid-year mark of 2025, the appetite for companies going public has remained muted. The abundance of capital in private markets paired with economic & political turbulence has led many late-stage companies to remain private. One trend that has emerged over the past six months is the widespread prevalence of company-sponsored secondary sale offerings. Personally, I’ve worked with individuals at eight separate companies that have announced tender offers in 2025. I believe there are a multitude of factors for why we’ve seen an uptick in tender offers in the first half of the year, two of which are:

  1. Employee Retention & Financial Incentive – With many founders opting not to pursue an IPO, tender offers provide an alternative method for providing liquidity to employees. A cash windfall helps boost employee morale while still keeping employees motivated for a (potential) larger liquidity event in the future.
  2. Looming Equity Expiration Dates – Many of the most valuable private companies were founded over a decade ago. Most stock option grants have an expiration of ten years from the date the options were granted. Without a liquidity event, many employees are stuck, unable to exercise their options and at-risk of forfeiting their early equity grants.

Gusto is the latest company to present a tender offer to employees. For some employees, this means they will incur tax implications as a result of their Restricted Stock Units (RSUs) vesting. The tender offer creates an opportunity for these employees to generate liquidity from their shares to help cover the taxes associated with the vesting of their RSUs. Other late-stage, private companies, who have also chosen to lift the second trigger on RSUs and to provide liquidity via secondary sale offerings, include Stripe, Databricks, and SpaceX.

So how does this new trend affect employees at these companies?

One thing is for certain – more employees are thinking about their equity now than they were over the past three years.

Some of the most frequent questions that I get asked are:

  • Should I sell now or do I hold out for a higher valuation at an IPO?
  • How can I use this tender offer to optimize the rest of my equity?
  • After taxes, what would my net proceeds be if I sold X% of my shares?
  • Are there any tax benefits or consequences that I should be aware of?
  • Will I be able to participate in future tender offers if I leave the company?
  • But Chris, it’s a down round… why would I sell any shares now?

I believe the decision to participate in a tender offer is very much a personal decision.

To help my clients assess if selling shares in a tender offer is the right decision for them, I’ve outlined some questions that I pose for evaluating a tender offer decision:

  • Do I believe that my company is the best investment opportunity that I have access to?
  • When do I think will be my next opportunity to sell shares? If this timeline is delayed, will I need to put other financial priorities on hold?
  • What needs to go right for my company to IPO at a higher valuation? What are the risks that could prevent this from happening?
  • Would the money I receive from the tender offer change anything about my life today?
  • How much money do I need to secure my family’s financial future?
  • Do I hold any unexercised stock options? If so, do I know the total costs associated with exercising these options?

This is just a sample of the questions to ask yourself to help make an informed decision regarding whether to participate in a tender offer.

If you have a tender offer presented to you, I’ve outlined three financial & tax planning opportunities to have on your radar.

  1. If you vested RSUs this year, then this will result in additional income. When your income tax bracket exceeds 32%, you are likely to have a larger “AMT Gap”, which enables you to exercise additional ISOs without incurring tax on the exercise event. This is due to the highest Federal Alternative Minimum Tax rate being 28%. You only pay AMT if your AMT > Regular Tax, so this creates an opportunity to take advantage of exercising ISOs in a higher than normal income year.
  2. When a company is private, they often can apply a discount to their Fair Market Value (also known as the 409a valuation) due to the shares being illiquid. Note: This discount can be removed when a company lifts the second trigger for RSUs. If your company’s FMV < Offer Price, and you’re bullish on the company, then it could be an attractive opportunity to exercise your options. Upon an IPO, this discounted valuation is no longer applicable.
  3. If you have previously paid AMT when exercising ISOs, then selling shares that have been held for more than one year at a higher price than the FMV when you exercised the ISOs, can enable you to recover the taxes paid. The AMT you previously paid functions as a tax “credit” that can be used to offset the long-term capital gains taxes you pay upon selling your shares.

Bonus Planning Opportunity: If you vested stock options in a state that has high taxes (think California or New York) and you have since relocated to a state with no income or capital gains tax, then exercising your options now can position you to capture future upside for your company stock without tax consequences on the state level.

My parting words, if your company has announced a tender offer – congratulations! A vast majority of employees who hold equity in a private company never have the opportunity to receive any value for their equity. The decision your colleague makes for a tender offer may not the right decision for you – remember, equity decisions, just like other financial decisions, are personal.