While the par value of a stock isn’t related to its actual market value, if you are a stockholder or potential stockholder, the par value is still an important figure to know. Par value is the price assigned by a corporation to shares of common or preferred stock upon incorporation. It’s also referred to as the stated value or face value of a stock. In states that require a par value, companies are not legally allowed to sell their shares of stock below the par value. However, in states that do not require it, corporations will usually not set a par value. If a stock does have a par value, it will be listed on the stock certificate, but you can also calculate the par value from the Shareholders’ Equity section of the company’s balance sheet.
The par value of a stock can be determined by dividing the total number of common / preferred stock at par value by the remaining number of outstanding shares.
Where to Find a Company's Balance Sheet
A balance sheet is a basic overview of a company’s financial status; listing assets, liabilities and equity. Balance sheets are usually issued on the last day of a quarter or year. You can find a particular company’s latest balance sheet on their website, or on a secondary website like NASDAQ.
Look for Stockholder’s Equity Section of the Balance Sheet
If you can find the balance sheet as it was issued by the company, you might find the par value of their common and preferred stocks listed under “Stockholder’s Equity.” If that’s the case, your calculation stops there. However, when you find the balance sheet on a secondary website like NASDAQ or Market Watch, you will generally only find the total value of stock at par value. For example, on NASDAQ, Amazon’s December 31, 2017 balance sheet only lists the “Common Stock Par Value” at $5 million which means that the value of all common stock currently issued is $5 million.
Divide the Total Stock Par Value by the Outstanding Shares
If you know the total value of a stock at par, you then need to find the number of outstanding shares. This number may be listed on the balance sheet, but can also be found on the company’s quarterly Securities and Exchange Commission filings. Once you have that number, simply divide the total common or preferred stock at par value by the outstanding shares of common or preferred stock and you’ll have the par value. Using Amazon as an example, the value of all common stock on the December 31, 2017 balance sheet is $5 million, and the total outstanding shares are 485,000,000, which gives a $0.01/share par value.
- Don't confuse the number of shares authorized with the number of shares outstanding. Many companies have not issued all of the shares authorized by their articles of incorporation. For example, a company might be holding extra shares to use for paying stock options for employees.
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