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When a new round is raised, the price paid by the investor gets her a preferred share. How does one compute the FMV of common stock compared to this? Specifical
by mavelikara 10y ago
When a new round is raised, the price paid by the investor gets her a preferred share. How does one compute the FMV of common stock compared to this? Specifically, are there any regulations regarding the max discount that can be applied to the price paid by the last investor to get the FMV of the common stock?
I recently came across a case where the FMV of common stock was only few %ge points less than what the last investor paid. But the investor was rumored in the press to have gotten significant privileges (a ratchet) for that price. So I was surprised that the prices were so close. Does anyone know why that could be so?
- hmahncke 10y agoThe FMV of common stock should be calculated through a 409a valuation, which should take into account the preferences. The company is supposed to do this on a regular basis, and certainly should have a current 409a a the time of an option grant. An individual can't really calculate an FMV on their own (outside of a sale, which unto itself creates an FMV).
- kevinpet 10y agoFor startups not within site of profitability or IPO, it's going to be around a third of the preferred price.