Private Company Stock Options: Determining Fair Market Value in ...

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Valuation “Quasi” Safe Harbor • Valuation of an “illiquid start-up corporation” (cont’d.) – Must take into account all relevant factors, including those described above – Presumption not available if the corporation reasonably anticipates at the time of the valuation that the corporation will undergo a change-in-control event or an IPO in the next 12 months 16
Case Study • Emerging technology company with two preferred rounds completed • Company in existence for 5 years • Board of directors includes CEO, two VC fund representatives, and two industry experts • Historically options granted to new employees on the date of hire and to all employees twice each year 17
Page 1 and 2: Private Company Stock Options: Dete
Page 3 and 4: The Law • American Jobs Creation
Page 5 and 6: The Law • 409A penalizes: - Disco
Page 7 and 8: The Law • Penalty for non-complia
Page 9 and 10: Valuation Methods • To qualify fo
Page 11 and 12: Valuation Methods • Factors to co
Page 13 and 14: Valuation “Quasi” Safe Harbor
Page 15: Valuation “Quasi” Safe Harbor
Page 19 and 20: Scenario 1 • IPO likely in 2006 o
Page 21 and 22: Scenario 3 • Neither IPO nor sale
Page 23 and 24: Modifications and Extensions • Mo
Page 25 and 26: Modifications and Extensions • Ex
Page 27 and 28: Remedial Measures • Alternative 1
Page 29 and 30: Accounting Considerations • AICPA
Page 31 and 32: GOODWIN PROCTER LLP Boston Exchange

Private Company Stock Options: Determining Fair Market Value in ...

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