“Cheap stock” is a connotation typically used to describe younger companies that have multiple tranches of equity, convertible or participating preferred stock and, in many cases, have obtained recent rounds of venture capital financing.
The guidelines for valuing common stock in so-called cheap stock situations are outlined in the AICPA Practice Aid, “Valuation of Privately-Held-Company Equity Securities Issued as Compensation.” MPI utilizes these methods when appropriate, including valuations for Section 409A or FAS 123R valuations.
Incentive Plans