409A & STOCK COMPENSATION VALUATION

Independent 409A Valuation for Private-Company Common Stock

Business Valuation Advisors provides independent, well-supported valuations of private-company common stock for IRC §409A compliance, stock-option strike-price support, annual valuation updates, and material corporate events. Our analysis considers financial performance, capital structure, recent financing transactions, ownership rights, market conditions, and the specific characteristics of the securities being valued.

  • IRC §409A Common-Stock Fair Market Value
  • Stock-Option Strike Prices, Annual Updates & Material Events
  • Preferred/Common Equity Allocation, OPM, PWERM & Backsolve

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409A & STOCK COMPENSATION VALUATION NEEDS
When an Independent Valuation Matters
Initial 409A Valuation

Independent valuation of private-company common stock when a company is preparing to grant stock options or other equity awards and needs a supportable starting fair market value.

Annual 409A Updates

Periodic 409A refreshes to keep common-stock valuation current for ongoing option grants, equity-compensation planning, and continued valuation support as facts and circumstances evolve.

Material Event Revaluations

Updated 409A analysis after financing rounds, major commercial developments, acquisitions, restructurings, or other material events that may affect common-stock fair market value.

Stock Options & Equity Awards

Valuation support for stock options, restricted stock, and other equity-based compensation arrangements that require a reasonable and well-documented common-stock value.

Cap Table & Security Structure Analysis

Analysis of capitalization, preferred and common stock rights, liquidation preferences, dilution, and other security terms that affect the value of the underlying common stock.

Financial Reporting & Compliance Support

Independent valuation support for companies, management teams, and advisors needing defensible documentation for IRC §409A compliance, audit support, and board-level decision making.

409A VALUATION ANALYSIS
409A Valuation Requires More Than Enterprise Value

A 409A valuation must determine the fair market value of the company’s common stock—not simply the value of the overall business. BVA evaluates enterprise value together with the capital structure, preferred-stock rights, recent financing activity, equity allocation, marketability, and company-specific developments to develop a supportable common-stock value.

  • Valuation date and specific class of common stock being valued
  • Historical financial performance, forecasts, cash flow, and operating outlook
  • Capitalization table, fully diluted shares, options, warrants, and convertible securities
  • Preferred-stock liquidation preferences, conversion rights, participation features, and other economic rights
  • Recent arm’s-length financing rounds, secondary transactions, and other relevant market evidence
  • Appropriate equity-allocation methodology, including OPM, PWERM, backsolve, or hybrid methods when applicable
  • Discount for lack of marketability and other common-stock-specific adjustments
  • Material corporate events, milestones, financings, litigation, or other developments affecting value
From Enterprise Value to 409A Common-Stock FMV

A 409A valuation begins with the value of the operating business, but the conclusion ultimately must address the fair market value of the company’s common stock. BVA considers cash, debt, non-operating assets and liabilities, recent financing activity, and other balance-sheet items to determine total equity value. We then evaluate the company’s capitalization table and the economic rights of preferred stock, common stock, options, warrants, and other securities. Where appropriate, equity value is allocated using methods such as the Option Pricing Method (OPM), PWERM, backsolve, or a hybrid approach, followed by common-stock-specific adjustments such as a discount for lack of marketability.

Professional Credentials Across the BVA Team

409A & Stock Compensation Valuation FAQs
A 409A valuation establishes the fair market value of a private company’s common stock for purposes including setting the exercise price of stock options and supporting compliance with IRC §409A. The analysis focuses on the value of the underlying common stock as of a specific valuation date
Typical information includes historical financial statements, forecasts, capitalization tables, option and warrant schedules, preferred-stock financing documents, recent equity transactions, material contracts, company milestones, and information concerning the rights and preferences of each class of equity.
A backsolve uses the price paid in a recent arm’s-length financing transaction, together with the company’s capital structure and security rights, to infer the total equity value consistent with that transaction. It can be particularly useful when a recent preferred-stock financing provides strong market evidence.
The analyses may share underlying information and methodologies, but they are not automatically interchangeable. Tax and financial-reporting valuations can involve different measurement objectives and assumptions, so the appropriate use of a 409A valuation for ASC 718 should be evaluated based on the specific circumstances.
A new valuation is commonly obtained at least every 12 months while the company continues issuing equity compensation. An earlier update may be needed when a material event occurs that could significantly affect value, such as a financing round, major commercial milestone, acquisition, litigation development, or other significant corporate event
BVA first develops an indication of the company’s enterprise and equity value and then considers the economic rights of the different equity classes. Depending on the facts, allocation methods may include the Option Pricing Method (OPM), Probability-Weighted Expected Return Method (PWERM), backsolve, or a hybrid approach.
Often, yes. Because privately held common stock generally lacks the liquidity available to publicly traded securities, the analysis may include a discount for lack of marketability when appropriate to the facts, circumstances, security characteristics, and selected valuation methodology.
Examples include a new financing round, significant change in financial performance or forecasts, issuance of a material patent, resolution of significant litigation, acquisition activity, major customer or commercial developments, or another event that materially changes the company’s value.
Explore All Private Business Valuation Services
 

View BVA’s full range of private business valuation, transaction, tax, litigation, ownership, SBA, and financial diligence services.
Business Acquisition & SBA Valuation
 

Independent valuation for acquisitions, business sales, and SBA financing, including normalized earnings and transaction analysis.
Startup, Intangible & Financial Reporting Valuation
 

Independent valuation of startups, pre-revenue companies, intellectual property, goodwill, promissory notes, and other intangible or financial assets for reporting, transaction, tax, and planning purposes.
Tax, Estate & Gift Valuation
 

Independent valuation for estate and gift tax matters, ownership transfers, succession planning, and closely held interests.
Litigation, Disputes & Economic Damages
 

Valuation and financial analysis for shareholder disputes, divorce, lost profits, appraisal review, and contested matters.
Partner Buyout & Ownership Valuation
 

Valuation support for partner exits, shareholder redemptions, buy-sell matters, and internal ownership transfers.

Discuss Your 409A & Stock Compensation Valuation

Whether you need an initial 409A valuation, annual common-stock update, material-event revaluation, or support for stock options and equity compensation, BVA can help define the appropriate scope and develop an independent, well-supported fair market value conclusion for private-company common stock.

Schedule a Confidential Consultation