Estimate common share fair market value from a preferred round valuation.
Common shares are worth less than preferred because preferred carries liquidation preference and other protections. The resulting discount is typically 20 to 50 per cent at early stage and narrows as a company matures. Valuations older than twelve months or predating a material event lose safe harbour status, which creates tax exposure for option holders.
409A Valuation
Common value = adjusted enterprise value × (1 − preferred discount), divided by shares
This is an illustration and not a 409A valuation. Compliant valuations must be prepared by a qualified independent appraiser. Setting option strike prices below fair market value creates serious tax consequences. Obtain professional valuation and tax advice.
Common value = adjusted enterprise value × (1 − preferred discount), divided by shares Common shares are worth less than preferred because preferred carries liquidation preference and other protections. The resulting discount is typically 20 to 50 per cent at early stage and narrows as a company matures.
Valuations older than twelve months or predating a material event lose safe harbour status, which creates tax exposure for option holders.
This calculator takes 5 inputs: Post-money valuation, Discount for common versus preferred, Fully diluted shares, Months since the round, Annual growth in enterprise value. The pre-filled defaults are a realistic starting point — replace them with figures from your own environment for a result you can act on.