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Re: tmsocha post# 145442

Saturday, 07/31/2010 4:02:40 PM

Saturday, July 31, 2010 4:02:40 PM

Post# of 221872
Your posting is so wrong, where do I start?

Par Value has no relationship to share price. It is arbitrary. The original difference between par value and share value is on the books as "Additional Paid-In Capital". Here is a link for a definition:
http://www.investorwords.com/3611/par_value.html

Second, your numbers are wrong too. If the company authorizes 1 million shares and issues 50,000 each for a total outstanding of 100,000 then each shareholder owns 50,000/100,000; not the other way around, 100,000/50,000.

Continuing on, "Establishing a stated value or par value of stock is considered a corporation’s “legal capital”. This may provide some protection for the shareholders because it is generally illegal for a corporation to pay dividends or repurchase shares if doing so impairs the legal capital. "

Again, wrong. Par value is NOT a corporation's "legal capital" and provides NO protection for shareholders. It is not illegal for a corporation to pay dividends at a deficit. Look at all the utilities that were building in the 1960-1980's that were paying in excess of their earnings as they installed new generating plants. It is considered a return of capital and decreases the cost basis. [e.g. Texas Utilities, Long Island Lighting, Florida Power & Light, etc.]

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