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I recently saw a public offering of securities stating the following:

We are offering 2,000,000,000 shares of our common stock, par value $0.00001 ("Common Stock"), at an offering price of $0.001 per share (the "Offered Shares") by the Company.

The previous close for this stock was $0.00035.

  1. Why par value of $0.00001 if it has been trading in the $0.0003 - $0.0004 range?
  2. Considering the par value and range, why would anyone pay the price $0.001 for this stock?
  3. What is the relation (if any) between these prices?
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Par value is purely an accounting mechanism. It has no practical meaning in the actual public market. (It can have some tax consequences depending on the company, but it's not material to this question)

In some jurisdictions, a company must declare a "value" for its public stock, much like bonds have a "par value". It then lists that value under "common stock" on the balance sheet. Any amount above that price that the company raises when it issues public shares goes under "additional paid-in capital" on the balance sheet. A higher par value would just mean a higher "common stock" value and a lower "paid-in capital" number - the total would be the same, though.

Most companies today use a very small par value, usually because of the tax consequences (to the founders, not shareholders) mentioned above.

Considering the par value and range, why would anyone pay the price $0.001 for this stock?

It depends on what they're going to do with the stock. If the company is deeply in debt, they may have very little equity to work with, and issuing stock would be an influx of cash that would help grow the company. But it has nothing to do with the par value.

  • OK, thanks! As for the why would anyone pay the price $0.001 for this stock? AAPL closed at $183 and 52 wk high is $233, why would they offer shares at $2,000 per share for example, and why would anyone buy them? – AbraCadaver May 21 at 14:05
  • They wouldn't. They would offer stock with a par value of 0.00001 and sell it for ~$200 (or whatever the market was willing to pay for them). Which means 0.00001 per share goes in "common stock" and $199.99999 goes in "paid-in capital". Looking at their balance sheet, they lump those together in one line, making par value even more meaningless. – D Stanley May 21 at 14:11
  • So in the example in your question, it's possible thy the stock offering increases the value of the company by allowing it to continue (a lifeline). That would not be the case for AAPL. – D Stanley May 21 at 14:17
  • does Par Value have anything to do with Limited Liability? my impression is that company declares it's liability = to par value * number of stocks issued – aaaaa says reinstate Monica Oct 18 at 16:37
  • @Oct18isdayofsilenceonSE I don't believe so - limited liability refers to the fact that shareholders are not liable for the debts of the company, while theoretically companies may be liable to shareholders if their stock goes below the par value. – D Stanley Oct 18 at 18:24

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