Difference between face value and market value of unlisted shares.

Unlisted shares denote ownership stakes in a company that are not available for trading on a public stock exchange. Rather, they are privately held by investors or shareholders and are not traded like publicly traded stocks. Companies with unlisted shares may or may not pursue an initial public offering (IPO). But their shares remain unlisted until they aren’t listed on NSE or BSE.

Understanding The Face Value Factor In Unlisted Shares:

Unlisted shares present in your Demat account and Depository account reflect their 'Face Value.' In simple terms, the face value represents the nominal amount assigned to a share at the time of issuance, indicating the minimum value of the share. 

To illustrate, suppose you possess 500 shares of an unlisted company with a face value of ₹10 each. In this scenario, your Demat account will display a total value of ₹5000 for these shares, notwithstanding the actual trading price of the shares, which may be higher.

When does one see the trading price of these shares in demat and depository accounts?

Once a company opts to become public, it proceeds with an Initial Public Offering (IPO), making its shares accessible for trading on NSE or BSE. After the IPO, the shares are listed on a stock exchange, and their valuation is no longer limited to the face value.

The listed value, commonly referred to as the market value, is typically influenced by the supply and demand in the market. Market value fluctuates over the course of the trading day and differs from the face value.

The value of these unlisted shares in your Demat account will automatically adjust once the IPO is initiated and the shares commence trading on the stock exchange. Subsequently, the value of your shares will continue to fluctuate in accordance with market conditions.

For example, let's say the shares are currently trading at ₹20, and you initially acquired them at face value of ₹10 in the unlisted market. In this scenario, your Demat account will now display a total value of ₹10,000 for your 500 shares.

Think of it in a way that your number of shares would remain the same, and only the value of that share would fluctuate. 

What is the difference between face value and Market value? 

Face Value

• Meaning: It represents the initial value assigned to a stock when it is first issued by a company.

• Price Determination: The company sets the price for its shares or bonds based on face value.

• Price Fluctuations: Face value remains constant and is not affected by market conditions.

• Calculations: The face value of a share is calculated by dividing the total equity share capital by the number of outstanding shares.

Market Value

• Meaning: It signifies the current price of a stock as determined by trading on the stock exchange.

• Price Determination: Market value changes according to the buying and selling activity on the unlisted market.

• Price Fluctuations: Market value can fluctuate due to various factors, including economic indicators, government policies, and global events.

• Calculations: The market value of a share is calculated by multiplying the current price per share by the total number of outstanding shares.

In conclusion, understanding the dynamics between face value and market value is crucial when dealing with unlisted shares. While face value represents the nominal value assigned to a share at issuance, market value reflects its current trading price in the unlisted market.