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Fair market value (FMV)

Also called: FMV

In one line

The price a share would change hands at between a willing buyer and seller — for private common stock, usually set by the 409A appraisal.

In plain English

FMV is the 'official' current value of a share. For private companies there's no live market, so the 409A appraisal stands in as FMV for tax and option purposes.

If you were explaining it to a 5-year-old

It's the fair price a toy would sell for if a willing buyer and willing seller agreed — not too high, not too low.

Why it matters when you sell

The spread between FMV at exercise and your strike price is what gets taxed, and FMV anchors what you can reasonably ask a secondary buyer to pay.

Related terms

409A valuationStrike priceBargain elementDiscount for lack of marketability (DLOM)

Put it to use

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Sources

A general market-practice term. See how we define and source the glossary in our methodology. General information, not advice.

Educational information only — not financial, tax or legal advice, and not an offer to buy or sell any security. Definitions are general; your own documents and local law govern your situation. PrivateTechShares is independent and not a broker or marketplace.