Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Courses
  • Tutoring
  • Home
  • Economics, Finance, & Analytics
  • Business Finance, Personal Finance, and Valuation Principles

No Par Value Stock - Explained

What is No Par Value Stock?

Written by Jason Gordon

Updated at April 16th, 2022

Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Marketing, Advertising, Sales & PR
    Principles of Marketing Sales Advertising Public Relations SEO, Social Media, Direct Marketing
  • Accounting, Taxation, and Reporting
    Managerial & Financial Accounting & Reporting Business Taxation
  • Professionalism & Career Development
  • Law, Transactions, & Risk Management
    Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
  • Business Management & Operations
    Operations, Project, & Supply Chain Management Strategy, Entrepreneurship, & Innovation Business Ethics & Social Responsibility Global Business, International Law & Relations Business Communications & Negotiation Management, Leadership, & Organizational Behavior
  • Economics, Finance, & Analytics
    Economic Analysis & Monetary Policy Research, Quantitative Analysis, & Decision Science Investments, Trading, and Financial Markets Banking, Lending, and Credit Industry Business Finance, Personal Finance, and Valuation Principles
  • Courses
+ More

Table of Contents

What is No-Par Value Capital Stock?How Does No Par Value Stock Work?

What is No-Par Value Capital Stock?

No Par Value stocks are issued without a par value mentioned either on the share certificate or in the issuer company's prospectus. There is no minimum baseline for determining the value of such stocks, the prices are determined by the amounts the investors are willing to pay.

Back to:BUSINESS & PERSONAL FINANCE

How Does No Par Value Stock Work?

Companies may prefer issuing a no-par value stock, as it allows them to sell the shares at a higher price in future offerings. It can also results in less liability for the issuing company to the shareholders in the events of dramatical price drop. The investors generally do not mind buying a no-par value share, as the market price of share fluctuates anyway. A no-par value allows to avoid confusion over the par value and the market value of a share. The stocks with par value may cause legal liabilities regarding the difference between the current market rate and the par value specified on the stock. The price of a no-par value is decided on the basis of the investors perceived value of the issuing firm. It depends on a number of factors including cash flows and competitiveness of the industry. Companies issuing no-par value stocks debits cash account and credits the common stock account or capital share account. Thus, implicit value is assigned to the issued stocks. However, no-par value stocks may be disadvantageous for the shareholders. If the issuing company accepts a lower price for the new issue, the value of already issued stocks get reduced, and the shareholders have to bear a loss. Issuing no-par value stocks is illegal in the United Kingdom and in some states of the United States. It is common in Belgium, Canada and some parts of the United States. In the states where no-par value stocks are illegal, companies issue stocks with par value set at $0.01 per share or a little more than this. These are called low-par value stock. This is done to enjoy all the benefits of the no-par value while theoretically conforming to the legal obligations.

no par value stock

Was this article helpful?

Yes
No

Related Articles

  • Run Rate - Explained
  • Startup Business Funding - Explained
  • Accredited in Business Valuations - Explained
  • Value of Dividends Method - Explained



©2011-2021. The Business Professor, LLC.
  • Privacy

  • Questions

Definition by Author

0
0
Expand