Face value

Face value is a financial term used to describe the nominal value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate.

The cumulative face value of the entirety of a company’s stock shares designates the legal capital a corporation is obligated to maintain. Only the above-and-beyond capital may be released to investors, in the form of dividends. In essence, the funds that cover the face value, function as a type of default reserve.

The face value of a stock does not denote the actual market value, which is determined based on principles of supply and demand, often governed by the figure at which investors are willing to buy and sell a particular security, at a specific point in time. In fact, depending on market conditions, the face value and market value usually have no correlation.