In Part 1 of this series (Secondary Transactions and 409A Valuations – Part 1: The Potential Impact), we discussed secondary transactions and their impact on 409A Valuations. To recap, the liquidity that some founders and early employees receive from their company or outside investors, considered secondary transactions, can sometimes re-establish the price per share for stock option grant (409A) purposes at the same price as the secondary transaction. Secondary transactions are often done in conjunction with a funding round so they are often at the same price as the round’s preferred stock. If common stock was sold in the secondary transaction, future option grants may have to be granted at this higher price, which is not ideal for new employees receiving options based on the latest preferred stock price. (more…)