How Does a 409A Affect Stock Option Pricing?

A 409A valuation sets the fair market value of your common stock. That number is what your board uses to set employee option strike prices. Without a current 409A, you do not have a clear, independent FMV to price grants against.

How does the 409A connect to the strike price?

Option strike prices are supposed to sit at or above common stock fair market value on the grant date. The 409A report is how most startups establish that FMV in a way that can support safe harbor. Safe harbor is a presumption that the valuation is reasonable unless shown to be grossly unreasonable. It is not a guarantee of IRS acceptance or audit outcomes.

When the FMV is higher, strike prices are higher and the option is worth less to the employee on day one. When the FMV is lower, strike prices can be lower. The 409A does not set a preferred-stock price or a fundraising valuation. It values common stock for compensation purposes.

How is that FMV calculated for early-stage companies?

409A.io uses an OPM backsolve to the most recent financing with a GPC cross-check, prepared in accordance with AICPA guidelines for privately-held equity issued as compensation. Same methodology used by firms charging $3,000 to $5,000. Typical firms charge $3,000 to $5,000 and take 2 to 4 weeks. Big Four firms often charge $8,000+ and take 4 to 8 weeks.

Subscribe at get-started at $99/month on a 12-month term, billed monthly. Complete the short onboarding form and upload your cap table and documents. Cap table upload takes under 5 minutes. CSV is supported.

409A.io delivers an audit-ready report within 48 hours of receiving your documents. Every report is reviewed by a valuation professional from the MELD team before delivery. Direct auditor support is included. We answer auditor questions about methodology and conclusions.

409A.io was spun out of MELD Valuation. MELD has completed 10,000+ valuations across 20+ industry sectors, valued $250B+ in assets, and has zero audit issues across its history. The team brings 16 years of valuation experience. Built for pre-seed through Series A.

When should I refresh so pricing stays current?

Refresh at least every 12 months, and after any material event such as a new financing round. A mid-year raise is a material event. Send updated documents and we issue an updated report. Updates upon request and material-event coverage are included during your term.

One plan covers the initial report, updates, material-event coverage, and auditor support. Everything is included at $99/month on a 12-month term. You pay first at get-started, then complete onboarding.

If your structure later includes non-standard instruments, structured equity, or complex waterfalls, graduate to MELD, or tell us your situation and we will point you the right way. Same team either path. We also work with leading cap table providers and offer preferred pricing through those relationships.

What is the next step?

Subscribe at get-started, upload your documents, and get the audit-ready report within 48 hours once we have them. Then price options against a current fair market value.

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