Common Par

RELATED WIKI ARTICLES

Related Articles

 
TOP CONTRIBUTORS

The par value of a common share is its minimum stated value at issuance, which does not correlate to the actual market value of the share.

The par value of a common share -- the most common investment in a company with the last claim on a company's assets behind bond holders and preferred share holders -- is its lowest initial price upon issuance of the share. The par value ensures investors can be confident that no one else is receiving a more favorable issue price. The common par value is a nominal value determined by the issuing company and is far more important in unregulated markets than many of today's regulated ones. Common stocks can be issued "at par" or "in excess of par" value. Typical par values are extremely low at prices of $1.00 or $0.01. If a share of stock, with par value of $1, were issued by the company at $60, it would be recorded as $59 "in excess of par value".

If the company issued stock below par value, the stock is called watered. Purchasers of watered stock are liable to the corporation for the difference between the par value and the price they paid.

Most common stocks issued today do not have par values as common par can be somewhat meaningless concept except as a means of bookkeeping; however, some stocks are required to have par values by law. If applicable, common par can be found on a company's balance sheet.

Examples

  • Company XYZ has common stock with a $1 par value with 1,180,000 shares outstanding. The company's total shareholder's equity is $21.43 million. The book value of this company is $21.43 million / 1.18 million shares outstanding for a value per share of $18.16, or $17.16 in excess of common par.
Please install Flash Player to view this chart.
Please install Flash Player to view this chart.
Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki