What Is Par Value? Why Samsung Electronics Is Listed at ₩100 While Its Stock Trades for Tens of Thousands of Won

That Tiny "Par Value: ₩100" Line in Your Brokerage App

Open Samsung Electronics' stock information screen in a Korean brokerage app, and the current price sits in the tens of thousands of won — but right below it, in small print, is another number: "Par value: ₩100." Look at a different stock and that number might read ₩200, ₩500, or ₩5,000. The first time an investor notices this, the natural question is: what does this number have to do with the price I'm actually paying, and does a lower par value mean a cheaper or riskier stock? The short answer is that par value has almost nothing to do with the current market price. But the reason this number still survives on every stock information screen — and why, on rare occasions, it can single-handedly block a company from raising capital — comes down to understanding what par value was actually built to do in the first place.

Par Value Is a Legal Number, Not a Market One

Par value is the nominal amount per share that a company writes into its articles of incorporation. Korea's Commercial Act, Article 329, requires that the par value of a share be at least ₩100 and uniform across all of a company's shares. In practice, companies tend to cluster around a handful of standard denominations: ₩100, ₩200, ₩500, ₩1,000, ₩2,500, or ₩5,000. The key point is that this figure has nothing to do with the company's assets, profitability, or how the market is pricing it on any given day — it's simply a number the company wrote into its charter when it was founded or when it issued shares. Par value's real job isn't to set a market price; it's to provide the basis for calculating legal capital (자본금) on the balance sheet. For a company with par-value shares, legal capital is a simple multiplication:

Legal capital = par value × shares outstanding

A company with a ₩100 par value and 100 million shares outstanding books ₩10 billion as legal capital — regardless of whether its actual market capitalization is ₩50 trillion or ₩500 billion. There's nothing strange about market cap and legal capital differing by several orders of magnitude, because the two numbers answer entirely different questions. Market cap answers "what does the market think the whole company is worth right now?" Legal capital answers "what is the total nominal amount shareholders legally committed to pay in when the shares were first issued?"

Why Does This Clunky System Still Exist?

If par value is just a nominal figure disconnected from market value, scrapping it might seem like the obvious move. But the system has survived for decades because it's tied into an older piece of corporate-law architecture meant to protect shareholders and creditors. Commercial Act Article 330 generally bans issuing new shares below par value. The logic: a company declares legal capital as a kind of minimum financial floor, and issuing shares below that declared floor would dilute the floor itself — undermining the baseline creditors are entitled to rely on. There's an exception. After incorporation, a company can issue shares below par if it clears strict hurdles — a special shareholder resolution plus court approval (Article 417). But because that process is demanding, companies that most need to raise cash — those whose accumulated losses have pushed their stock price below par value — are often the ones most likely to find themselves blocked from issuing new shares at exactly the moment they need the money most. Korean investors run into this logic indirectly through capital reduction (무상감자) filings: one reason a company in capital impairment is forced to consolidate its shares is precisely to rebalance legal capital against accumulated deficits within this par-value framework.

No-Par Value Shares: A 2012 Fix for This Exact Problem

The no-par-value share system exists to solve exactly this bind. A 2011 amendment to the Commercial Act, effective April 15, 2012, let companies choose not to set a per-share par value in their articles at all. Without a par value, the concept of "below-par issuance" simply doesn't apply — a company can issue new shares at whatever price the market will bear, no matter how far its share value has fallen, and still raise capital. No-par shares still have a rule for setting legal capital, just a different one. Under Commercial Act Article 451(2), the board of directors (or shareholders, depending on the charter) must designate at least half of the issue proceeds as legal capital, with the rest booked as capital surplus. In other words, instead of a fixed formula like "par value × share count," a no-par company has some discretion, decided fresh at each issuance, over how much of the proceeds get classified as legal capital. Interestingly, more than a decade after the system was introduced, relatively few listed Korean companies actually use no-par shares. Converting from par to no-par requires a special shareholder resolution, an amendment to the articles, and a new corporate registration — administrative friction that, combined with how familiar everyone already is with the par-value system, has kept adoption limited. That's a notable contrast with the US and several other developed markets, where no-par shares (or trivially small, effectively meaningless par values) are the norm rather than the exception.

A concrete example makes that discretion clearer. Say an unlisted company issues 100,000 new no-par shares at ₩100,000 each — total proceeds of ₩10 billion. The board must set at least half, ₩5 billion, as legal capital. If it sets exactly ₩5 billion, the remaining ₩5 billion becomes capital surplus. If the board instead takes a more conservative route and designates ₩8 billion as legal capital, only ₩2 billion is left as surplus. A par-value company has no such choice — the split is locked in by the par value written into its charter. That flexibility is useful for a company's capital-raising strategy, but it also means investors have to check each issuance's disclosure to see exactly how much ended up as legal capital that time.

Normalized Price: Comparing Stocks With Different Par Values

Having wildly different par values across stocks creates a real practical headache. Comparing raw share prices across two companies with different par values can be misleading — Company A trading at ₩100,000 isn't necessarily "more expensive" or "better" than Company B at ₩10,000. If A's par value is ₩5,000 and B's is ₩100, the picture can look completely different once you put them on the same footing. To manage this, Korean market practice uses a supplementary figure called normalized price (환산주가): a hypothetical price recalculated as if every stock had a par value of ₩5,000.

Normalized price = current price × (₩5,000 ÷ that stock's par value)

A stock with a ₩100 par value trading at ₩80,000 has a normalized price of ₩80,000 × (5,000 ÷ 100) = ₩4,000,000. A stock with a ₩5,000 par value trading at ₩600,000 keeps the same normalized price, ₩600,000. Run the math and a stock with a deceptively "cheap-looking" low par value can turn out to be far more expensive on a like-for-like basis. Still, normalized price isn't a core valuation tool. Unlike PER, PBR, or PSR, which tie a price to actual earnings or assets, normalized price only corrects a distortion that the par-value system itself creates — it's closer to a reminder not to be fooled by raw price than an investment signal.

Part of why normalized price still matters traces back to market history. There was a long stretch when setting a ₩5,000 par value at listing was close to standard practice, so comparing raw prices across stocks wasn't especially misleading back then. Since then, more newly listed companies have started with low par values like ₩100 or ₩200, and more existing companies have carried out stock splits to improve liquidity, which is how par values across the market became this varied. Once that happened, the intuition that "a lower price means a cheaper stock" stopped holding reliably, which is exactly why a correcting figure like normalized price is still kept around as a reference tool.

The Connection to Stock Splits and Reverse Splits

The concept in this lesson is actually something several other lessons already assumed. Stock splits and buybacks covered stock splits, which, precisely described, lower a stock's par value while increasing its share count by the same ratio. Split a ₩5,000 par-value stock 5-for-1, and the par value becomes ₩1,000 while the share count multiplies by five — legal capital (par value × share count) stays exactly the same before and after. Reverse stock splits run this process backward, raising par value while shrinking share count. In both cases, the company's actual value and total legal capital don't change — only how that legal capital is split between "par value per share" and "number of shares" shifts. Par value is a number most investors can safely ignore day to day, but it resurfaces as the shared unit of measurement whenever a company's capital structure actually moves — in a capital reduction, a split, a reverse split, or a new share issuance.

Takeaway

• Par value isn't a market price; it's a nominal figure set in a company's articles under Korea's Commercial Act, serving as the base for the formula legal capital = par value × shares outstanding.
• The Commercial Act generally bans issuing new shares below par value (Article 330), allowing exceptions only through a demanding process for post-incorporation issuances (Article 417).
• Korea's no-par-value share system, effective since 2012, sidesteps this constraint entirely by not setting a par value at all — but administrative friction has kept actual adoption limited.
• Normalized price rescales every stock's price to a common ₩5,000 par-value basis, correcting the illusion created by differing par values across stocks.
• Capital-structure events like stock splits, reverse splits, and capital reductions all operate on this same underlying relationship between par value, share count, and legal capital.

FAQ

Does a lower par value mean a cheaper stock?

No. Par value is just the nominal basis used to calculate legal capital; it has no direct relationship to market price. A low par value doesn't signal undervaluation, and a high one doesn't signal overvaluation — actual investment judgment should rely on valuation metrics like PER and PBR along with earnings, not par value.

Does par value change when a stock splits?

Yes. A stock split, precisely described, lowers par value and increases share count by the same ratio. In a 5-for-1 split, both par value and per-share price drop to one-fifth of their prior levels while share count multiplies by five, and total legal capital stays unchanged before and after.

How is legal capital set for a company that issues no-par shares?

Instead of the fixed "par value × share count" formula, the board (or shareholders, depending on the charter) must designate at least half of the issue proceeds as legal capital, with the remainder booked as capital surplus, under Commercial Act Article 451(2).

⚠️ This article is for informational and educational purposes only and is not investment advice. The statutory provisions and effective dates cited here are based on publicly available legal information; statutes can be amended, so verify current rules and consult a professional before relying on them. Investment decisions, and their outcomes, are the investor's own responsibility.