Evening star., 1919-12-28
MANY NEW STOCKS
HAVE NO PAR VALUE
Wall Street Journal Says
Fashion Is Result of Discus
sions in Banking Circles.

Most stock issues of new promo
tions this year have been of no par
value. according to the Wall Street
Journal.
The fashion set in as the result of
discussions in banking and legal cir
cles which all pointed to the conclu-
sion that 1t was misleading to place
a dollar mark as representing a fixed
definite value to a share of stock
Agitation against "watered stock K
had accompanied this development in
financing methods. which brought into
share represents proportional in
tereSt in the assets of the corpora :
ton.
Changes in the New York state laws
and later in those of Pennsylvania
made possible the change to no par
stocks, and another benefit sought has
been more equitable basis of taxa
ton than that of taxing par values
which usually were altogether out of
line with market values.
Arguments in Favor of Change.
There have been many arguments
III favor of the change. The par or
face value of stock was no true
index of the worth of the property
behind it. Often the shares sell at a
big discount. 1t is considered better
that no nominal value be placed on
the certificates and that rather the
market should put it's appraisement t
on them. Unthinking people un
familiar with corporate matters have
doubtless been misled by the nominal
value stamped on a certificate.
Under the par value method of cap
italization, the real worth of the prop
erty was not known to the purcha ser
of the stock of corporation merely
by the nominal figure placed on the
stock certificate. Methods of organiza-
ton permitted very wide latitude in
Valuation Of properties acquired, and sc
laws that required 500 of property
money or services for each 500 par
value were not an effective safeguard
to the investor. Today he knows he
buys proportionate interest in the cor
poration'S business and assets, emitting
him to his share or equity in profits
tificates of stock.
The value of the property represented
by each certificate cannot be fixed, and
is almost constantly changing. Wher
new enterprise is launched there
must be opportunity for profit beyond
enough securities issued to raise the
desired amount of cash capital To put
1t differently, concern that was being
hoated and for which it was desired te
get say $1.0O0,000 cash capital might
have to issue considerably more thar
that amount in securities in order tc
make its f1otaton possible Eventual,
the securities might appreciate great,
IN the market as the corporation pros.
pered. and perhaps sell much above the
par value.
Investor Can Figure Value.
When a corporation furnishes a state
ment OF assets and liabilities and o1
earnings the investor can figure the as.
sets ana prOnts share just as we'll or
no par stock as on stock worth par
he 49, therefore. in just as good a
position 10 form his judgment as te
the real worth of the stock
Where issues of preferred STOCK
are made preferred as to participation
IN assets in the event of dissolution
OF the corporation, it is still neces-
sary TO nave such class of stock of a
honiinal or par value, since it's share
OF the assets must be limited.
The New York statute provides tina
when shares of common stock are tC
be issued without nominal or ma,
Faiue the certificate of incorporation
with other things, shall state the
NUMBER of shares that may be issued
py the corporation. If there are to
characteristics and the value pei
share of such preferred stock is tc
be stated and then:
The amount of capital with which
the corporation shall carry on bust
ness, which amount shall be not less
than the amount of preferred stock
Gf any) authorized to be issued with
preference as to principal, and in
addition thereto sum equivalent
to IS, or some multiple Of SIS, for every
share authorized to be issued other
than such preferred stock; but in
no event shall the amount of such
capital be less than $500"
The outstanding common sb,ra, ~,
not less than IS share, should be
included in the capital stock and
appear on the balance sheet as liza
bility.