Stock Option Valuation for Non-Public Companies – the Impact of FAS 123R and Code §409A

July 15, 2008 Published Work
Technology Today, Connecticut Innovations Newsletter July 2008

Gone are the days when non-public companies could value stock option grants based on rule-of-thumb discounts from preferred stock values, multiples of EBITDA or simply a board's judgment.
Two recent regulatory developments – FAS 123R and Internal Revenue Code §409A – both of which require that companies determine the value of common stock when it's used for compensation purposes – are driving non-public companies toward more formal (and more frequent) valuations for grants of stock options and SARs and other stock-based compensation (all referred to in this article as "options").