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409A Valuation?
When was your company’s last valuation?
More than a year ago?
Less than a year ago?
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Question 1 of 4
a. More than a year ago
b. Less than a year ago
01
B. Less than a year ago
Has your company conducted a fundraiser since its last valuation?
A. Yes
02
B. NO
Has your company conducted a liquidity event since its last valuation?
03
Is your company preparing to go public?
04
It may be time for a new valuation!
If it has been more than a year since your company’s last valuation, it may be time for a new 409A valuation. The safe harbor period, which allows your company to grant stock options at (or above) the 409A valuation for 12 months, has likely expired. Granting stock options without safe harbor protections could hurt your option holders and your company.
Learn More about 409A
Talk to a 409A Specialist
1
This assumes that your company’s previous 409A valuation met IRC 409A requirements for safe harbor.
Disclosure
Morgan Stanley at Work, Shareworks, Morgan Stanley Smith Barney LLC, and its affiliates and employees do not provide legal or tax advice. You should always consult with and rely on your own legal and/or tax advisors.
Morgan Stanley at Work and Shareworks services are provided by Morgan Stanley Smith Barney LLC, member SIPC, and its affiliates, all wholly owned subsidiaries of Morgan Stanley. CRC 3679990 (07/24)
Preparing for a new Valuation
It's never too early to start planning!
Morgan Stanley at Work and Shareworks services are provided by Morgan Stanley Smith Barney LLC, member SIPC, and its affiliates, all wholly owned subsidiaries of Morgan Stanley. CRC 4644389-4/22
RESTART
Situations that represent significant changes to the business that may materially impact the value of the company, like a liquidity event or fundraise, may be considered a “material event” under the requirements of IRC 409A. A renewed 409A after a material event can help to protect the company and shareholders from incurring potential tax penalties related to newly issued stock options with exercise (i.e., “strike”) prices that are too low.
planning for a material event
It may be time for a new valuation
Obtaining frequent 409A valuations leading up to IPO may help to avoid “cheap stock” issues and prevent delays, especially if the company uses an independent appraiser who provides a robust rationale for their methodology (and changes to it). For some companies, it may be beneficial to get a new valuation for each grant date and avoid granting awards when a new valuation is pending
Talk to Liquidity Specialist
Based on your answers in this quiz, your company may not be in urgent need of a 409A valuation. However, for startups especially, early planning for your next valuation may help to alleviate headaches down the line. A few things to think about when sourcing a provider are experience, cost, and transparency.
2
This quiz is not intended to be exhaustive or to provide advice of any kind. We recommend getting in touch with your legal team to determine whether a 409A is required for your company, especially if your company has recently undergone changes that could materially affect its valuation.
Morgan Stanley at Work and Shareworks services are provided by Morgan Stanley Smith Barney LLC, member SIPC, and its affiliates, all wholly owned subsidiaries of Morgan Stanley. CRC 3679990-7/24
