Question 1

How often should we revalue on an IPO path?

Accepted Answer

Quarterly is common, and more frequently around material events. Auditors expect a contemporaneous valuation supporting every grant date in the registration period.

Question 2

What is a cheap-stock issue?

Accepted Answer

Where option grants in the run-up to a listing are judged to have been priced below fair value in hindsight, producing additional stock-compensation expense and questions in the registration process.

Question 3

Does an active secondary market set our 409A price?

Accepted Answer

It does not set it, but it is strong evidence and it has to be reconciled with. A valuation that ignores a liquid market in its own common stock is not defensible.