Valuation
What is Fair Market Value (FMV)?
The price a willing buyer would pay a willing seller in an open market - established for private company stock via 409A valuation.
Fair market value is the price at which a security would change hands between an informed buyer and seller, neither under compulsion. For public stocks, FMV is the market price. For private company stock, FMV is established by a 409A valuation (for tax-compliant option grants) or by the most recent priced round. FMV at exercise determines the ordinary income for NSOs and the AMT preference for ISOs. Strike prices for new option grants must be set at or above the current FMV.