# Half Stock

## What is half the stock?

Half a stock is a security sold with a nominal value which is 50% of what is considered the standard price. The nominal value refers to the nominal value of a bond or, in some cases, of a share.

Half of the shares can be either ordinary shares or preferred shares and, apart from the reduced nominal value, acts as a regular share of the shares. The face value of a typical share is \$ 100, which means that half of the shares have a face value of \$ 50.

## Explanation of the half stock

The valuation of a share of common shares is often the same for a common share of shares and half of shares, since a large part of the value of shares is linked to growth potential. The face value is an important factor in determining the dividend of a share, which makes it more important for the preferred share. In addition, preferred shares may have a higher claim on the proceeds of a company that has been liquidated, generally equivalent to their nominal value. Half of the preferred shares would potentially receive less in liquidation.

The nominal value is most often a term used in bonds, that is to say the nominal value of a bond, representing the principal amount that the lender or the investor lends to the borrower or the issuer. . In terms of stock, it also receives a face value, but the number is usually small and arbitrary, like \$ 0.01 per share. Preferred shares generally receive a higher value because they are used to calculate dividends.

### Key points to remember

• A half stock is a type of security sold whose face value is roughly half of what is considered the standard price.
• Half of the shares can be either ordinary or preferred and acts as a regular share of the shares, apart from the fact that it has a reduced nominal value.
• However, a half share is most often a preferred share, rather than an ordinary share, and generally involves the payment of a dividend.

## Common shares versus preferred shares

Common shares and preferred shares, however, have some significant differences. Common shares are a security that represents the property of a company. The holders of ordinary shares elect the company’s board of directors and vote on the company’s policy. But common shareholders are low on the ownership priority ladder. In the event of liquidation, ordinary shareholders are only entitled to the assets of a company after full payment by bondholders, preferred shareholders and other creditors.

Preferred shares are a level of ownership in a company that has a greater claim on its assets and profits than common shares. With common stocks, there is no obligation for a company to offer dividends. With preferred shares, shareholders expect to receive dividends. The promise of dividends is a selling characteristic, intrinsic to the security. Preferred shares generally have a dividend which must be paid before dividends to common shareholders, and the shares generally do not carry voting rights.

Preferred shares are much rarer than common shares. Most so-called blue chip companies do not offer preferred shares at all, including Apple (AAPL), Exxon Mobil (XOM) and Microsoft (MSFT).

## Example from the real world

Half a stock has a nominal value which is generally half of what is considered normal. So let’s assume that the face value of the preferred shares of the e-commerce company BuySell is \$ 100. However, the company decides that it also wants to issue half a stock. Half of the shares are still considered a preferred share and are still ranked higher on the priority scale than common shares, but since it is half of the shares, it will pay a lower dividend to shareholders and give owners less claims on assets if the company needs to declare bankruptcy and liquidate. Buy preferred share issues with a face value of \$ 50, which makes them half of the shares.