There are lots of reasons companies stay private\u2014but the longer a company delays going public, the more early investors and employees demand liquidity<\/a>. Savvy employees and investors are starting to choose companies based on if and when companies will hold liquidity events<\/a>. At Carta, we believe prospective employees will soon ask about tender offers and other liquidity options when considering job offers, especially as companies stay private longer.<\/a><\/p>\r\n\r\n\r\n\r\n There are many ways for private companies to offer employees and investors liquidity before going public. One of the most common ways is a tender offer.<\/p>\r\n\r\n\r\n\r\n A tender offer is a structured, company-sponsored liquidity event. A tender offer typically involves multiple sellers who sell their shares either to an investor or back to the company. The company arranges buyers, chooses a trading price, and prepares disclosures and transaction documents for buyers and sellers. When the company purchases the shares, it’s commonly called a \u201cshare buyback\u201d and when an investor purchases shares it\u2019s usually called an \u201cinvestor purchase.\u201d<\/p>\r\n\r\n\r\n\r\n Tender offers are great for sellers because they can turn their shares into cash. Tender offers are great for companies as well, because they help companies attract and retain talent, and manage dilution during fundraising. It\u2019s hard to hire in tech. When an employee compares offers, it can be difficult to know which offer is better. There are a lot of unknowns outside of salary and benefits, especially when it comes to how much your equity could be worth at a private company.\u00a0<\/p>\r\n\r\n\r\n\r\n When an employee has two job offers that include equity\u2014one from a private company and one from a public company\u2014it’s much easier to determine the value of the public company equity. Anyone can look up the value of public company shares. Plus, the public stock is a liquid asset\u2014when those shares vest, that equity is as good as cash. Private companies who offer liquidity can better compete with public companies for talent.<\/p>\r\n\r\n\r\n\r\n If you’re competing for talent with other private companies, regular company-sponsored liquidity events can make your company more appealing to applicants. They may also encourage current employees to stay at your company longer.<\/p>\r\n\r\n\r\n\r\n The bottom line: Running regular tender offers can help attract new talent and encourage employees to stay with you longer.<\/strong><\/p>\r\n\r\n\r\n\r\n Current investors, founders, and employees of private companies have a common concern about fundraising\u2014dilution. When raising a new round of financing, there\u2019s a balance between issuing new shares and diluting current shareholders.\u00a0<\/p>\r\n\r\n\r\n\r\n If your business has enough cash, there’s a trick. A tender offer can be an anti-dilution tool\u2014meaning you can leverage tender offers as a way to bring on new investors or allow current investors to increase their holdings without diluting your shareholders. Your investors and employees will also get an opportunity to turn some of their shares into cash.\u00a0\u00a0<\/p>\r\n\r\n\r\n\r\n The bottom line: It’s a win-win. Work with new investors, control dilution, and give current investors and employees liquidity.<\/strong><\/p>\r\n\r\n\r\n\r\n Carta makes tender offers easy When your cap table<\/a> is on Carta, setting up your Carta tender offer is fast and simple. Unlike with other tender offer providers, there\u2019s no onboarding to a new system. Carta\u2019s experienced team facilitates the transaction for you and your shareholders. We collect participants\u2019 orders on our platform, settle the transaction, and automatically update your cap table<\/a> when it\u2019s done.\u00a0<\/p>\r\n\r\n\r\n\r\n![\"\"](\"https:\/\/lh3.googleusercontent.com\/NsgVwtfRi5YdWfpUkXB6lETlXeLiiatO0XRvCb13ixW5bs3XQkZgqo1IDn2okP6qTIadU92mW10ZH2cjTqrrvtac1HFuAsuQ2zmnQ3g9SLkesLVJjuYWm_By8uwuAXqVyWqRzzw\" "\\"\\"")
What is a tender offer?<\/h2>\r\n\r\n\r\n\r\n
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<\/p>\r\n\r\n\r\n\r\nAttract and retain talent<\/h2>\r\n\r\n\r\n\r\n
Manage dilution during fundraising<\/h2>\r\n\r\n\r\n\r\n
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