Half Stock

A half stock is a share issued with a par (face) value that is roughly half of the standard par value for that class of stock. It can be issued as common or preferred stock, but in practice half stock is more often a form of preferred stock and typically carries a proportionally smaller dividend and smaller claim on assets in liquidation.

Key takeaways

• A half stock has a par value approximately 50% of the usual par value for that security.
• It can be common or preferred, though it is most often issued as preferred stock.
• Par value matters more for preferred shares because it is commonly used to calculate dividend payments and liquidation claims.
• Half stock generally results in proportionally lower dividends and lower liquidation priority compared with a full-par-value preferred share.

How half stock works

Par value is the nominal face value assigned to a share. For bonds, par value represents the principal amount; for stock, par value is often a small, arbitrary number (e.g., $0.01) but can be used to determine dividend amounts for preferred stock.

When a company issues half stock:
* For preferred shares, dividends are typically tied to par value, so a half stock usually pays a proportionally smaller dividend than a full-par-value preferred share.
* In liquidation, preferred shareholders have higher priority than common shareholders; a half preferred share’s claim on assets is proportionally smaller than that of a full-par-value preferred share.
* For common stock, market valuation is driven chiefly by growth prospects rather than par value, so a half-par common share may trade similarly to a full-par common share despite the lower face value.

Common stock vs. preferred stock (brief)

Common stock
* Represents ownership and typically carries voting rights.
* Dividends are discretionary and paid after preferred dividends.
* Lower priority in liquidation.

Preferred stock
* Has higher claim on assets and earnings than common stock.
* Usually pays fixed dividends that take precedence over common dividends.
* Often lacks voting rights.
* Par value is more meaningful because it helps determine dividend amounts and liquidation claims.

Example

Suppose a company issues preferred shares with a standard par value of $100. If it issues half stock, those preferred shares would carry a $50 par value. They remain preferred shares (with higher priority than common stock) but will pay smaller dividends tied to the lower par value and will have a proportionally smaller claim in liquidation.

Considerations for investors

• Check whether the half stock is common or preferred and how dividends are calculated.
• Understand voting rights (half preferred shares often carry no voting rights).
• Review liquidation priority and how par value affects recovery in bankruptcy.
• Examine prospectus or offering documents for exact terms—dividend rates, conversion features, and other rights vary by issue.
• Consider liquidity and market demand; unusual share classes can trade less actively.

Conclusion

Half stock is a relatively straightforward variation in par value that mainly affects preferred shares’ dividend amounts and liquidation claims. For investors, the crucial factors are whether the share is preferred or common, the dividend terms, and the specific rights attached to that class of shares.