What Is Face Value Of A Share?
Companies decide face value of a share at the time of issuance, and it may be subject to change—higher or lower—later.
This is a series of explainers to educate and inform new investors. In association with Dun & Bradstreet India as knowledge partner.
Face Value: Definition, Meaning & Basics
The face value is the original cost of a stock and represents denomination of shares, similar to currency notes.
Companies decide face value of a share at the time of issuance, and it may be subject to change—higher or lower—later. When face value changes, say from Rs 10 to Rs 2, it is called a stock split—a Rs 10 share is split into five shares of Rs 2 each. The opposite happens in case of consolidation of shares.
An investor may not be able to buy shares at face value and may have to pay higher. This is called as share premium. If a company issues a share with face value Rs 10 and an investor has to pay Rs 140 to buy it, then the investor has paid Rs 130 as share premium.
Visit the Financial Terms section for more.