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Par value

A nominal legal value printed in the charter, often a fraction of a cent for common stock, with almost no relationship to market price.

Par value on common-stock is a legal artifact. It sets a floor below which shares may not be issued in some jurisdictions and it determines how the balance sheet splits equity between common stock and additional paid-in capital. Many charters use $0.0001.

Par value does matter for preferred-stock, where it is the basis for the coupon and for the liquidation preference, and for bonds, where it is the repayment amount.

Example: a company issues 10M shares at $18 with a par value of $0.001. The balance sheet shows $10,000 in common stock and $179.99M in additional paid-in capital. The par figure tells you nothing about the $18.

Related: preferred-stock, common-stock, book-value, outstanding-shares

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