Stated Value Explained: Meaning, Function & Real-Life Example

What Is a Stated Value?

A company can choose to issue stock with no par value, but for its own records, it must designate a stated value to satisfy the minimum requirement for legal capital in the state where it incorporates. So, stated value is a monetary amount assigned to a share of stock for internal accounting purposes. It has no relation to market price.

For example, if the stated value is $0.01 per share and the company issues 1 million shares, then the total stated value of all shares is $10,000.

Understanding the Mechanism of Stated Value in Stock

A company can choose to issue no par value stock, but for its own records, it must assign a stated value to satisfy the minimum requirement for legal capital in the state where it incorporates. As an example, if the stated value of a company is $0.01 per share and the company issues 1 million shares, the stated value of its stock is $10,000. This amount is credited to the company's capital stock account and is considered the legal capital of a corporation.

Because it is generally illegal for a company to pay dividends or repurchase shares if doing so impairs the legal capital, the stated value helps to provide shareholders with some protection. However, in practice, with the stated value per share as low as one penny, monetary interest is modest or de minimus.

Real-World Example: No Par Value Stock in Action

Apple Inc.'s balance sheet for its fiscal year 2019 showed an authorization of 12.6 billion no par value shares and 9.2 billion shares issued and outstanding. The common stock in the shareholders' equity account was worth $45.2 billion as of the end of the fiscal year. There is no note in Form 10-K that breaks down the account into stated value and additional paid-in capital amounts, but it can be assumed that almost all of the $45.2 billion represents additional paid-in capital.

The Bottom Line

If a company decides to issue stock with no par value, it must designate what's called a stated value to satisfy legal capital requirements in its state of incorporation. This monetary amount is for internal accounting purposes only and has no relation to the stock's actual market price. Usually, the stated value will be somewhere between one cent and one dollar.