Stock Compensation

Q: What is a 409A valuation?

A 409A valuation is an independent assessment of the fair market value of a private company’s common stock, required under IRC Section 409A for companies issuing equity compensation. It establishes the exercise price for stock options and other deferred compensation arrangements.

Q: When do we need a 409A valuation?

A 409A valuation is required before issuing stock options or other deferred compensation. It should also be updated following material events including new financing rounds, significant changes in the business, M&A activity, or after 12 months have elapsed since the last valuation.

Q: What is the IRS safe harbour for 409A valuations?

The IRS safe harbour for 409A valuations requires the valuation to be performed by a qualified independent appraiser, to use a reasonable valuation method, and to be conducted within 12 months of the grant date. Valuations that meet safe harbour requirements shift the burden of proof to the IRS in any challenge.

Q: How often do we need to update our 409A valuation?

A 409A valuation must be updated at least every 12 months, or sooner if a material event occurs: such as a new financing round, significant change in business performance, M&A activity, or approaching IPO.

Q: What methodology do you use for 409A valuations?

We apply the three standard approaches — income, market, and asset — weighted based on the company’s stage, industry, and available data. We also apply the option pricing model or probability-weighted expected return method to allocate value across the capital structure.

Q: How quickly can a 409A valuation be completed?

Timeline depends on the complexity of the capital structure and information availability. We are structured to accommodate tight grant timelines and can discuss your specific requirements during an initial consultation.

Q: What information do you need to complete a 409A valuation?

We typically require financial statements, the most recent cap table, any recent financing documents, and management’s financial projections. We will outline specific requirements at the outset of each engagement.

Independent 409A Valuations and Stock-Based Compensation Analyses for Private Companies

Houlihan Capital provides independent 409A valuations and stock-based compensation analyses for private companies, supporting equity plan administration, tax compliance, and financial reporting requirements.

Our analyses are grounded in rigorous methodology and structured to support IRS scrutiny, giving boards, management teams, and their advisors confidence in the defensibility of the valuation.

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What We Do

Stock Compensation Valuation Services

409A Valuations (IRC 409A)

Independent fair market value determinations of common stock for private companies issuing equity compensation, supporting compliance with IRC Section 409A.

Stock-Based Compensation (ASC 718 / IFRS 2)

Valuation of stock options, restricted stock units, and other equity awards for financial reporting purposes under ASC 718, including Black-Scholes and lattice model analyses.

Complex Securities Valuation

Valuation of complex equity structures including preferred stock, warrants, convertible instruments, and other securities for compensation and financial reporting purposes.

Option Pricing Model Analysis

Development and application of option pricing models including Black-Scholes, binomial lattice, and Monte Carlo simulation for equity compensation valuation.

Equity Plan Advisory

Advisory support for equity plan design, valuation methodology selection, and compliance considerations in connection with stock-based compensation programs.

Why Houlihan Capital

Defensible 409A Valuations That Support Your Equity Program

Houlihan Capital provides independent 409A valuations grounded in rigorous methodology and clearly documented, giving your board, management team, and legal counsel confidence in the defensibility of the valuation.

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IRS-Defensible Methodology

Our 409A valuations apply consistent, well-documented methodology aligned with IRS safe harbour requirements, providing a defensible basis for equity compensation grants and reducing the risk of IRS challenge.

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Industry-Specific Expertise

Deep knowledge across AI, crypto, cannabis, healthcare, SaaS, and other specialized sectors. Our team understands the industry-specific factors that drive common stock values at different stages of development.

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Responsive Delivery

We understand the time sensitivity of equity grant cycles. Our team delivers 409A analyses on timelines aligned with your grant schedule, without compromising the quality or defensibility of the analysis.

Common Questions

Questions Companies and Their Advisors Ask Us

What is a 409A valuation?

When do we need a 409A valuation?

What is the IRS safe harbour for 409A valuations?

How often do we need to update our 409A valuation?

What methodology do you use for 409A valuations?

How quickly can a 409A valuation be completed?

What information do you need to complete a 409A valuation?

Strategic Insights

Guidance for Private Companies and Their Advisors

Valuation Services Overview

A broad overview of Houlihan Capital’s valuation capabilities across financial reporting, tax, and transaction advisory.

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