As VC-backed companies mature, they may not be ready for an IPO or a sale, but private secondary transactions on common stock are a way to get some liquidity for the founders prior to an exit.
Any secondary transaction with the Company’s common stock should be carefully evaluated to determine the relevance and the potential impact on the common stock price for 409A Valuation purposes. The AICPA guide: Valuation of Privately-Held-Company Equity Securities Issued as Compensation establishes a clear set of rules regarding this issue. (more…)