QUOTE(Molotov Cocktail @ Dec 12 2010, 02:03 PM)
so if a company want to issue IPO with share price of rm1.50 per share with par value of rm1.00, so the company capital is based on rm1.00 per share or rm1.50? if they put in the balance sheet rm1.00 per share for their capital, where does the other rm0.50 goes to? im also curious why some company doesn't have par value
there is one counter i monitored recently which is Huayang the share price is traded below it's par value meaning it is not a good stock?
Under share premium account.
All share got its par value, even private entity company.
Par value is the value of paid up capital, aka when you start a company time, let say you have 100k capital injected into the company for start up, by then company has 100K paid up capital, which being reflected or as share issued of Rm1 par value of 100k shares.
After that company can make profit or loss in the process.
If company is making profit, now company got 200K cash and still making profit, market out there willing to pay/transact at Rm1.50 for the company share (still with RM1 par value of 100K share available).
As times go, with more and more profit being made, the share price can go to Rm50 with the same Rm1 par value of 100K shares, because company is now more valuable than before.
Generally speaking (not 100% must be), if a share price is traded below par value, which mean investors are pessimistic about the company future, aka the company could potential making loss by then the initial 100K can be gone due to losses.
Actually when we invest, we don't look at the par value at all.
You look at what is the level of worth to invest.
Par value is somehow meaningless, except it reflects how much capital being put in before only.
This post has been edited by cherroy: Dec 12 2010, 06:19 PM