Valuing common stock in an early-stage company that has completed a Series A preferred stock financing can be challenging. According to the AICPA’s “cheap stock” practice aid, many of the conventional valuation techniques, such as the discounted cash flow method and the guideline public company method are not applicable for early-stage companies. Instead, appraisers are advised to use the option-pricing method to backsolve to the Series A value. That calculation requires an in-depth understanding of the Series A terms. Join Joel Johnson for a review of how Series A impacts the value of early stage companies.
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