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This ties into the whole issue with bloated valuations [1]. VC's are paying for preferred shares and other deal points that make all classes of shares appear t

• dlubarov 12y ago
  But taxes are normally paid based on the latest 409a valuation, which can be way below the preferred stock value from the latest funding round. My impression is that companies rarely sell common stock to investors for that reason (among others). Since investors valued the preferred stock, common stock holders can ignore their massive valuation for tax purposes, and use the 409a.
  • downandout 12y ago
    Still, an appraiser brought in to do a 409a valuation wouldn't be doing their job if they completely ignored the valuation from the latest funding round. The value will be lower by a subjective amount determined by the appraiser, but is still likely to be somewhat inflated if the preferred rounds were also inflated.