Compliance

Tender Offers and Secondary Sales: What They Do to Your 409A Valuation

Tender offers and secondary sales are back. Here's how a tender triggers a new 409A valuation, becomes a pricing anchor, and raises your option strike prices.

By 409.AI Team - 2026-07-14

# Tender Offers and Secondary Sales: What They Do to Your 409A Valuation

For a few years, the private secondary market went quiet. It isn't quiet anymore. US startups ran an estimated $18.4 billion of tender offers in 2025, and [Nasdaq Private Market](https://www.nasdaqprivatemarket.com/nasdaq-private-market-announces-first-ever-employee-tender/) alone handled close to $15 billion of tender volume that year, up from roughly $3 billion in 2023. Stripe ran a tender at a reported $91 billion valuation in early 2024 and again at $159 billion in early 2026. Databricks did one at $62 billion. SpaceX has run them like clockwork.

If you're a founder or finance lead watching this revival, there's a detail that rarely makes the headline: the moment your company or your employees sell shares in a real transaction, you've handed your 409A appraiser a new, hard piece of evidence. That evidence usually pushes the fair market value of your common stock up, which lifts the strike price on every option you grant next. Here's how that chain actually works, and how to run a tender without getting a nasty surprise on your next valuation.

Why boards are running tenders again

The mechanics are less interesting than the motive. Companies are staying private far longer than they used to, so employees with vested shares and no exit are getting restless. A board-sponsored tender offer lets long-tenured staff sell a slice of their equity for cash while the company stays private, which turns out to be a strong retention tool when senior engineers are being poached.

There's also a defensive angle. Unsanctioned secondary trading on platforms like Forge and Hiive has roughly doubled year over year for three years running. When employees are already selling shares to outside buyers at prices the company can't see or control, running a structured tender is a way to take back the wheel. Roughly 110 companies ran a board-sponsored tender in the twelve months leading into mid-2026, and the pace is still climbing.

All of that activity generates something your valuation firm can't ignore: actual prices, from actual buyers, for your actual stock.

A quick refresher on what your 409A measures

A 409A valuation sets the fair market value of your common stock, which becomes the minimum strike price for the options you grant. It is not your headline post-money number. If you've read our explainer on [why your 409A valuation is lower than your post-money valuation](https://409.ai/articles/why-is-your-409a-valuation-lower-than-post-money-valuation), you already know the gap comes from two things: your priced rounds sell preferred stock with liquidation preferences and other rights that common shares don't have, and common shares carry a discount for lack of marketability, or DLOM, because they can't easily be sold.

The whole exercise runs on a single legal standard: the price a hypothetical willing buyer would pay a willing seller, with neither under pressure and both reasonably informed. That standard is also why a tender offer matters so much. It's covered in more depth in our [409A versus fair market value](https://409.ai/articles/409a-valuation-vs-fair-market-value) piece and the [complete guide to what a 409A valuation is](https://409.ai/articles/what-is-a-409a-valuation-a-comprehensive-guide). An appraiser is always trying to estimate what a willing buyer would pay. A tender offer isn't an estimate. It's a willing buyer actually paying.

A tender offer is a "material event"

Most founders know a 409A is good for up to a year. Fewer know why, and the "why" is where tenders bite.

Under Treasury Regulation §1.409A-1(b)(5)(iv)(B), a valuation done by a qualified independent appraiser gets a rebuttable presumption of reasonableness. If the IRS later challenges it, the burden sits with them to show the method was grossly unreasonable, not with you to defend it. That safe harbor is the entire reason companies pay for an independent 409A instead of guessing. The catch is the presumption only holds for 12 months and only until a material event that would reasonably be expected to change your value, whichever comes first.

A financing round is the classic material event. So is an acquisition offer, a major customer win or loss, or a big shift in your business. A company-sponsored tender offer at a stated per-share price is squarely on that list. Once the tender closes, your existing 409A is stale for grant purposes, and any options you issue against the old, lower FMV are exposed. Getting the timing right is exactly why the [frequency of your 409A](https://409.ai/articles/409a-valuation-frequency-how-often-should-you-get-one) isn't really a calendar question. It's an events question, and a tender is one of the loudest events there is.

The practical rule: plan on a fresh 409A that incorporates the tender before you grant another option. Don't keep granting off the pre-tender number.

How appraisers weigh a secondary transaction

Not every secondary carries the same weight, and this is where good appraisers earn their fee. The framework comes from the AICPA's *Accounting and Valuation Guide: Valuation of Privately-Held-Company Equity Securities Issued as Compensation*, whose Chapter 8 lays out how to treat primary and secondary transactions as evidence of value.

Three factors drive how heavily a transaction gets weighted:

Volume. A single small sale between two people tells you less than a broadly subscribed tender that moved millions of dollars of stock. More participants and more volume mean more signal.

Recency. A trade from last month says more about today's value than one from ten months ago. Appraisers lean on the most recent data because value moves.

Who was on each side. An arm's-length sale between unrelated, sophisticated parties is strong evidence. A transfer to a founder's relative, or a below-market insider deal, gets discounted or set aside. The willing-buyer, willing-seller test assumes neither party is under duress and neither is getting a sweetheart deal.

A structured, board-run tender usually scores well on all three, which is why it tends to become the single strongest data point in your next valuation. This is really the [market approach](https://409.ai/articles/market-approach-409a-valuation) applied to your own stock instead of comparable public companies. When the market you're comparing against is a live transaction in your exact shares, it's hard for any other input to outweigh it.

From tender price to strike price: calibration

Here's the part that surprises founders. When an appraiser has a credible tender price, they don't just paste it in. They calibrate to it. They run your usual model, often an option pricing model backsolve or a probability-weighted expected return scenario, and then check whether the model's implied common value lines up with the price common shares actually traded at in the tender. If your model spits out a common FMV well below the tender price, that's a signal the model, or its discount, needs adjusting.

The discount for lack of marketability is usually where the adjustment lands. A tender offer is, by definition, a moment of liquidity. If your employees can sell into a recurring program, their shares are less illiquid than a company with no secondary market at all, so a smaller DLOM is warranted. In practice, early-stage companies often see DLOMs in the 30 to 40 percent range, while late-stage companies with established secondary activity commonly see that compress toward 15 to 25 percent. Those are illustrative ranges, not rules, and your appraiser sets the number based on your facts. The direction, though, is reliable: more liquidity, lower DLOM, higher common FMV.

A simplified example shows the effect. Say your last round priced preferred at $10.00 a share, and your prior 409A put common at $6.00 using a 40 percent DLOM. You run a tender in which common shares change hands at $8.00. Your appraiser now has to reconcile a model that implied $6.00 against real trades at $8.00. Calibrating the DLOM down to around 20 percent might bring the model's implied common value up near that $8.00 print. New option grants would then carry a strike near $8.00 rather than $6.00. Nothing about your company got worse. Your stock just got a real, observable price, and your paperwork has to reflect it.

One nuance worth flagging for your finance team: the price relevant for your 409A (the fair market value of common for option strike prices) and the price relevant for your ASC 718 stock-compensation expense can diverge in how heavily the secondary is weighted. [Carta has noted](https://carta.com/blog/the-impact-of-a-secondary-transaction-on-your-next-409a-valuation-is-changing/) that some companies now use separate analyses for the two, because the accounting guidance can push appraisers to rely more heavily on secondary-implied values for ASC 718. If you're already grappling with the expense side, our [ASC 718 guide for startups](https://409.ai/articles/asc-718-stock-based-compensation-startup-guide) walks through how that ties back to your 409A.

What it means for employees and your next grants

Existing option holders keep their existing strike prices. A tender doesn't reprice a grant already made. The change hits new grants, which now sit at a higher strike because common FMV rose. For a recruit, that means less built-in spread on day one, so it's worth being transparent with candidates about where FMV is heading after a tender.

The tax mechanics don't change, but the stakes do. A higher FMV at grant compresses the bargain element on incentive stock options and shifts the ordinary-income math on non-qualified options at exercise. If your team is fuzzy on the difference, point them to our breakdown of [how ISOs and NSOs are each taxed](https://409.ai/articles/iso-vs-nso-how-stock-options-are-taxed). And note that participating in a tender is itself a taxable sale for the employee, generally capital gain over their basis, which is a separate event from the option exercise.

Running a clean tender

A few things keep a tender from turning into a valuation headache. Document that the tender was arm's length and available to a defined class of holders at a uniform price, because that's what makes it credible evidence. Line up the new 409A so it's ready before you resume granting. Give your appraiser the full tender terms, participation data, and who bought, so they can weight it properly rather than guess. And if the numbers look off, our guide to [dealing with an incorrect 409A](https://409.ai/articles/dealing-with-incorrect-409a-valuations) covers how to challenge and fix a valuation before it causes downstream problems.

The revival of secondaries is genuinely good news for employees who've waited years for liquidity. Just treat every tender as what it is on the compliance side: a material event that resets your 409A clock and hands your appraiser the strongest evidence they'll ever get about what your common stock is worth. Price that in before you run the program, not after. If you need a 409A that properly incorporates a tender or secondary, that's exactly what [409.ai's 409A valuations](https://409.ai/products/409a) are built to handle.