A cash tender offer is a public bid by an acquirer to buy shares directly from a company’s shareholders at a fixed cash price, usually set above the current market price. Federal securities law requires the offer to stay open for at least 20 business days, and while it is open you can decide whether to sell, wait, or change your mind after tendering. The bidder speaks to shareholders directly rather than negotiating solely with the target’s board, and if you accept, you exchange your shares for cash in a single transaction at a known price.
How Long the Offer Stays Open
Under SEC Rule 14e-1(a), a tender offer must remain open for at least 20 business days from the date it is first published or sent to shareholders.1eCFR. 17 CFR 240.14e-1 – Unlawful Tender Offer Practices If the bidder changes the price or the percentage of shares it wants to buy, the offer must stay open for at least 10 additional business days after that change is announced.
Extensions are common. When the bidder extends, it must publicly disclose the extension, along with the approximate number of shares tendered so far, no later than 9:00 a.m. Eastern time on the next business day after the originally scheduled expiration. Watch for these announcements. The number of shares already tendered tells you how close the deal is to meeting its minimum condition.
Equal Price for Every Shareholder
The all-holders, best-price rule at 17 C.F.R. § 240.14d-10 requires that the offer be open to every holder of the class of securities being sought, and that the consideration paid to any shareholder equal the highest consideration paid to any other shareholder in the offer.2GovInfo. 17 CFR 240.14d-10 – Equal Treatment of Security Holders If the bidder raises the price partway through, that higher price goes to everyone, including anyone who already tendered at the lower number. You cannot lose by tendering early, at least not on price.
Where to Read the Terms and the Board’s View
Two filings tell you almost everything you need to know. The bidder files a Schedule TO with the SEC, and it becomes publicly available on EDGAR. Schedule TO discloses the bidder’s identity and background, the source and amount of funds financing the purchase, the terms of the offer, and the bidder’s plans for the target company after the acquisition.3eCFR. 17 CFR 240.14d-100 – Schedule TO Tender Offer Statement It also includes a plain-language summary term sheet.
The target company’s board responds on Schedule 14D-9 with its recommendation: accept, reject, or remain neutral.4eCFR. 17 CFR 240.14d-9 – Recommendation or Solicitation by the Subject Company Read the 14D-9 carefully. It reveals conflicts of interest, including executive retention bonuses, accelerated stock options, and change-of-control payments that directors or officers stand to receive if the deal closes. Management’s financial incentives will not always match yours.
Most offers also include conditions that let the bidder walk away, most commonly a minimum condition requiring a specified percentage of shares to be tendered (often a majority or more), regulatory approvals, and the absence of any material adverse change in the target’s business.
How to Tender Your Shares
The Letter of Transmittal is the operative document. It transfers your shares in exchange for payment, and you complete it with the exact number of shares you are tendering, your legal name as it appears on the company’s records, and your current mailing address. Once the bidder accepts your tender, a properly completed Letter of Transmittal and delivery of shares creates a binding contract.
Book-Entry Shares Held Through a Broker
If your shares sit in a brokerage account, contact the broker’s corporate actions department. The broker initiates a book-entry transfer through the Depository Trust Company, and the shares move electronically from your account to the depositary’s account.5U.S. Securities and Exchange Commission. Processing of Reorganization Events, Tender Offers, and Exchange Offers You should receive a confirmation once the transfer is complete.
Physical Certificates
If you hold paper certificates, mail them with the signed Letter of Transmittal to the depositary bank named in the offer documents. Use registered mail with return receipt requested so you have proof of delivery before the deadline. The depositary will usually require a Medallion Signature Guarantee on your Letter of Transmittal. This is not a notary stamp. It is a specific guarantee provided by a financial institution participating in one of the recognized Medallion programs, and it protects against forged signatures.6Investor.gov. Medallion Signature Guarantees – Preventing the Unauthorized Transfer of Securities Banks, credit unions, and broker-dealers in these programs generally guarantee signatures only for their own customers, so start early if you are not already a customer at a participating institution.
Form W-9
Submit an IRS Form W-9 with your Letter of Transmittal. This gives the depositary your taxpayer identification number so it can report the payment. Without a valid W-9, the depositary must withhold 24% of your proceeds and send it to the IRS as backup withholding.7Internal Revenue Service. Backup Withholding You can recover the amount by filing your tax return, but it ties up a significant portion of your payment in the meantime.
Missing the Deadline by a Day
If you cannot deliver your shares or paperwork by the expiration date, most offers permit a notice of guaranteed delivery. This preserves your right to participate for a short window after the offer expires, typically three business days, during which you must complete the actual delivery. The common case is buying shares on the last day of the offer: you own them legally, but settlement takes a couple of days, so the shares are not yet in your account.
Your Right to Withdraw
Under SEC Rule 14d-7, you can withdraw tendered shares at any time while the offer remains open by sending a written notice to the depositary specifying your name, the number of shares being withdrawn, and the name on the certificate if it differs from yours.8eCFR. 17 CFR 240.14d-7 – Additional Withdrawal Rights Once the offer closes, you generally lose that right.
Section 14(d)(5) of the Exchange Act adds a backstop: if the bidder has not accepted your shares for payment within 60 days from the date the offer began, you regain the right to withdraw regardless of other deadlines.9Office of the Law Revision Counsel. 15 USC 78n – Proxies This keeps your shares from being trapped indefinitely in a deal that has stalled on financing or regulatory review.
One boundary worth flagging: withdrawal rights do not apply during a subsequent offering period, which is a voluntary extra window a bidder may open after the initial offer closes.10eCFR. 17 CFR 240.14d-11 – Subsequent Offering Period Shares tendered during a subsequent period are locked in. If you are undecided, tender during the initial period, when you can still pull out.
When You Get Paid
SEC Rule 14e-1(c) requires the bidder to pay for accepted shares, or return unaccepted shares, “promptly” after the offer closes or is withdrawn.1eCFR. 17 CFR 240.14e-1 – Unlawful Tender Offer Practices The rule does not specify a number of days. In practice, most bidders fund payment within one to three business days after expiration and satisfaction of all conditions. The depositary sends payment by check to your registered address or by wire to your brokerage account, depending on how you tendered. Shares that are not accepted come back through the same channel they went out: certificates by mail, book-entry shares re-credited to the brokerage account.
Partial Offers and Proration
Some tender offers seek only a portion of the outstanding stock. When more shares are tendered than the bidder is willing to buy, federal rules require the bidder to accept shares on a pro rata basis.11eCFR. 17 CFR 240.14d-8 – Exemption From Statutory Pro Rata Requirements If you tender 1,000 shares and the proration factor is 60%, the bidder buys 600 and returns 400.
Many partial offers give priority to odd-lot holders, meaning shareholders who own fewer than 100 shares. If you qualify, you can tender all of your shares and have them accepted in full before proration is applied to everyone else. Certify on the Letter of Transmittal that you own fewer than 100 shares and are tendering all of them.
What Happens If You Don’t Tender
Not tendering does not mean you keep your shares indefinitely. Most cash tender offers are the first step in a two-stage process. The bidder acquires a controlling stake through the tender offer, then forces a merger to buy out the remaining shareholders at the same price per share.
In most states, once the bidder owns 90% or more of the target’s outstanding shares, it can complete a short-form merger without a shareholder vote. Remaining shareholders receive the merger consideration, typically the same cash price offered in the tender, whether they want to sell or not. That is why many tender offers set a minimum condition at or near 90%: hitting that threshold lets the bidder close the deal quickly.
If you object to the merger price, most states provide appraisal rights, sometimes called dissenters’ rights. You can petition a court to determine the fair value of your shares, and the company must pay whatever the court decides. To preserve this right, you generally must not vote in favor of the merger and must follow precise procedural steps in your state’s corporate statute. Missing a deadline can permanently forfeit the right, so read the merger documents carefully if you intend to dissent.
Be realistic. Appraisal proceedings are expensive, slow, and uncertain, and courts sometimes award less than the tender offer price. Most holdouts end up with the same amount tendering shareholders received, only later.
Tax Treatment of Your Proceeds
The IRS treats a sale in a cash tender offer the same as any other stock sale. The difference between your proceeds and your cost basis is a capital gain or capital loss.12Internal Revenue Service. Topic No. 409, Capital Gains and Losses Shares held more than one year qualify for long-term capital gains rates, which for 2026 top out at 20% for the highest earners. Shares held for one year or less are taxed as short-term gains at your ordinary income rate.
Long-term capital gains rates for 2026:
- 0% rate: taxable income up to $49,450 for single filers, $98,900 for married filing jointly, or $66,200 for head of household.
- 15% rate: taxable income above those thresholds but below $545,500 (single), $613,700 (married filing jointly), or $579,600 (head of household).
- 20% rate: taxable income above the 15% ceilings.
Your broker reports the transaction on Form 1099-B, with proceeds in Box 1d and cost basis in Box 1e for covered securities. Covered securities generally include shares acquired for cash in a brokerage account after 2010.13Internal Revenue Service. Instructions for Form 1099-B (2026) If your shares are older or were transferred between brokers without proper basis records, you are responsible for tracking the correct basis yourself. Report the gain or loss on Form 8949 and summarize totals on Schedule D of Form 1040.
If backup withholding was taken because you did not submit a valid W-9, that amount shows up as a credit when you file your return.