409A Valuations and Other Complex Securities Valuations

Nov 10, 2021 11:40am ‐ Nov 10, 2021 12:55pm

Identification: FVC2156

This session presents step-by-step practical examples of how to address common challenges in IRC 409A valuations and in the valuation of debt with embedded derivatives, anti-dilution rights, warrants, options and profit interests as compensation. We will provide examples of suitable methodologies to estimate series volatility, including examples of delta-partitioning. We will discuss how to estimate Discounts for Lack of Marketability based on latest tax and accounting guidance, including consideration of qualitative and quantitative factors. We will examine differences in the valuation of private equity instruments as stock-based compensation under IRC 409A and under the fair value standard (ASC 820/ASC 718).

Learning Objectives:
  • Develop a model for the valuation of debt with embedded derivatives, anti-dilution rights, warrants, options and profit interests as compensation.
  • Illustrate how to construct a delta—partitioning model to estimate series volatility for equity instruments in a complex capital structure.
  • Apply Discounts for Lack of Marketability under various Put Option Models as applicable to 409A valuations