Face Value

Face Value refers to the nominal or dollar value of a security stated by the issuer. This is the amount that will be paid back to the bondholder at maturity, regardless of the market price of the bond or Stock.

For Bonds, the face value is typically set at $1,000, which means that at maturity, the bondholder will receive $1,000, regardless of how much they paid for the bond originally. For Stocks, the face value is often a very small amount, such as $0.01, and serves more as an accounting measure than an indication of market value.

Examples:

• A bond with a face value of $1,000 might be sold for $950 in the market. Upon maturity, the bondholder will receive $1,000.
• A Corporation issues Shares with a face value of $0.01 each. If the Shares are sold at $10 each on the market, the face value remains $0.01 for accounting purposes.

Cases:

• In a financial crisis, a company’s Bonds may trade below face value due to perceived risk, but investors still receive the face value at maturity.
• During an IPO, a company’s Shares may have a low face value, but their market price can be much higher based on demand and investor interest.