A stock is a type of security that represents ownership in a company/ corporation divided into equal shares that are a claim on its earnings (dividends) and assets (residual interest). An entity issues stocks as a means of fragmenting its ownership base into small units representing respective ownership stakes by the holders.

A share of stock may be issued with a par value or no-par value. The par value, or face value, is the stated value per share. This price used to be printed on paper stock certificates before newer electronic versions have become more prevalent.

Par value stock is a stock (share of stock) that has an arbitrary value established in the articles (charter) of its issuer (i.e., the par value). The par value multiplied by the total number of shares issued is the minimum amount of equity capital that is generated from selling the stock. Par value stocks used to bear their par value on the front of the old version, paper stock certificate.

Companies were required by law, in certain countries, to determine and print a par value on their stock certificates. For that reason, companies tended to use and set the smallest possible value (e.g., one cent or a penny price).

If the stock is sold below the par value and the issuer later experiences financial problems leading to inability to pay or settle its financial obligations, its creditors can claim the difference between the purchase price and the par value to recover their outstanding debt from equity holders. In another scenario, the market price of the stock may drop below the par value, and the issuer may be liable to shareholders in the tune of the amount of such a drop.

For example, if a company issues 1,000 shares of stock bearing a par value of $20 each, then the minimum amount of equity capital that can be secured by the sale of those shares is $20,000. Since the market value of the stock does not correspond to its par value, investors may buy the stock in the secondary market for less than $20. If all the issued shares can be purchased below par, for a price such as $15, the company will generate only $15,000 in equity. If the business goes under and cannot meet its financial obligations, shareholders could be held liable for the $5-per-share difference between par and the purchase price.

A no-par stock is a stock that is issued without any designated minimum value (i.e., it bears no par or face value at the time of issuance). The value of no-par stocks is completely determined based on the market, not as per a guaranteed value (the par value) that is set at the issuance of the stocks. This is opposed to par value stocks where the corporate charter used to contain certain provisions setting a specific value that is the minimum which investors must pay for the stock.