No-Par Stock Definition and Legal Meaning
On this page, you'll find the legal definition and meaning of No-Par Stock, written in plain English, along with examples of how it is used.
What is No-Par Stock?
n.Shares isuued by a corporation without mentioning its face value on the stock certificate.
History and Meaning of No-Par Stock
No-Par Stock is a term used in corporate finance to describe shares issued by a company without mentioning their face value on the stock certificate. The concept of no-par stocks began to emerge in the early 20th century as a response to the need for greater flexibility in corporate finance. Prior to this, most stocks were issued with a fixed par value, which was considered to be the minimum price at which the stock could be sold. This approach was seen as restrictive, as it prevented companies from changing the price of their shares in response to market conditions.
With the introduction of no-par stocks, companies gained greater flexibility in setting the price of their shares. Instead of a fixed par value, these shares were often issued at a price determined by the market. This allowed companies to respond more quickly to changes in market conditions, and it also made it easier for them to raise capital.
Examples of No-Par Stock
- ABC Corporation issues 1,000 no-par shares of stock to investors, with a starting price of $10 per share. This means that the total value of the shares initially issued is $10,000.
- XYZ Corporation has authorized the issuance of 100,000 shares of no-par stock, but has not yet issued any of these shares.
- John purchases 50 no-par shares of DEF Inc. at $15 per share. As a result, he now owns a 5% stake in the company.
Legal Terms Similar to No-Par Stock
- Par Value: Par value is the face value of a share of stock, as determined by the company that issues the stock.
- Authorized Shares: Authorized shares refer to the maximum number of shares that a company is permitted to issue under its articles of incorporation.
- Common Stock: Common stock is a type of stock that represents ownership in a company, and entitles the shareholder to a portion of the company's profits or losses.