I conceptually understand what it is - it’s money contributed by owners through events other than the primary issuance of the stock. What I don’t understand (and can’t find an example of) is when does this ever actually happen in a public company? I understand if I run a small business and I add cash to it out of pocket… but in a big corp? Not a big deal, just curious -Ed
Additional paid in capital is what is paid in excess of par. Say common stock par value is $5. But the company issues stock in the market @ $20 (not directly, sure, through an underwritter). That would lead to a $5 increase in common stock equity, and $15 in Additional paid in capital on company’s balance sheet. Please correct me if I’m wrong.
Map1, I also think so. When company goes IPO and issue stock to public, if its IPO successful add. paid in capital becomes bigger. Additional paid in capital in company b/s equal to the difference between success IPO price per share and par value per share multiply by number of common share map1 Wrote: ------------------------------------------------------- > Additional paid in capital is what is paid in > excess of par. Say common stock par value is $5. > But the company issues stock in the market @ $20 > (not directly, sure, through an underwritter). > That would lead to a $5 increase in common stock > equity, and $15 in Additional paid in capital on > company’s balance sheet. > > Please correct me if I’m wrong.
what about capital raised through a rights issue to existing shareholders?
Capital raised through a right to issue to existing shareholders is nothing different with IPO issuance. Par value is shareholder equity. Excess of par value for a right issue to existing shareholder is still paid in capital.
Whenever there is a share sale/buyback, rights offering, convertible debt, or whatever, then the minute this invloves the common stock account, additional paid-in may be affected, up, down or unchanged, depending on the case.