409A valuation

Also called: 409A, 409(a), fair market value, FMV, strike price, exercise price

An independent appraisal of what one share of a private company's common stock is worth. US companies use it to set the price at which employees can buy shares with their stock options. The name comes from section 409A of the tax code.

For example: An appraiser values a startup's common stock at 50 cents a share. The company then grants stock options that let employees buy shares at 50 cents each.

Connects to 4

Stock options Concept
Valuation Concept
Preferred stock vs common stock Concept
Option pool Concept

This glossary is plain-language orientation, not legal or financial advice. Before you decide on a company structure, a contract, taxes or a fundraising deal, talk with a lawyer or an accountant.