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What is stock face value?
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the holder at maturity, typically in $1,000 denominations.
How is the value of an IPO stock determined?
You can determine the value of shares in an IPO by dividing the number of shares sold by the sum total of paid-in capital.
Is IPO price and face value same?
The face value can be any value like INR 2, INR 10, or INR 1000. The issue price, also called price band, is the stock’s face value plus the premium that a company demands to charge from its investors. In simpler words, The issue price of the share = Face Value of the share + Premium asked by the company on the share.
Face Value of the share is determined by the company before the IPO. It is the minimum value below which the price of the stock won’t fall. For an investor, generally, it doesn’t mean much, since the market value is mostly above the face value and that is all that matters to the investors.
What is the face value of a stock?
Meanwhile, the face value of the stock should not be confused with the issue price of the stock. The issue price consists of an added premium over and above the face value that a company asks of their potential subscribers. In simple terms, the issue price = face value + premium. Of course, the premium is not something that is decided at random.
Why do IPOs set the price band near the face value?
There have been IPOs that have set the price band near the face value of the shares, which means the company sought minimal premium. The meaning of face value is clear, but what is the utility of the face value. After listing, the stock price of a company changes according to the market conditions and the performance of the company.
What is the difference between face value and issue price?
The face value, also known as the par value, is the nominal value of the shares. The face value is either Re 1, Rs 2, Rs 5 or even Rs 100. The issue price or the price band are the face value of the shares with an added premium that the company decides to ask from potential subscribers. The issue price= face value + premium