Ordinary shares

(1. A company can choose whatever issue price it wants for their shares to be issued in the stock market but it got to be less than nominal price?) Almost there except you have (I assume) mistyped ONE word! Instead of ‘got’ you should have typed ‘not’. That makes a huge difference. According to your sentence, such a company would be breaking the law 🙂

(2. IF a company chooses to issue shares at a higher issue price than nominal value then the extra is called share premium?) This is correct

(3. Issue price is also called strike price that is decided by the company when it issue shares? ) Again correct but I believe I should maybe clarify what I think could be some confusion in your mind. It became a relatively common practice for substantial companies coming to the market (typically under Margaret Thatcher’s privatisation of public companies schemes) in the 1980s for companies to invite the public to subscribe for shares to be issued under these privatisation moves. When B(ritish) T(elecom) came to the market, applications were invited whereby the public paid 50 pence for each share for which they were applying to purchase with the promise that more would be required from them once the issue details and strike price had been finalised. I can’t remember the figures for the number of shares that were available in the privatisation but let’s assume that the number was 800,000,000. When the application list was closed, offers had been received from the public for 5,600,000,000 ie seven times over subscribed. This was clearly an attractive proposition in the minds of the public so the Government was able to arrive at a strike price of £1.30 with a further 40 payable on the notification of the allotment of the shares to the people successful in the lottery and a final 40 pence payable on the first anniversary of the allotment.

(4. How do you define me the difference between issue price and market price?) Issue price is a one-off figure and is the price at which a company issues shares. It applies to the shares ONLY on their date of issue (hence the name!) Market price is the price of a share as quoted on the (stock) market and is publicised each day following a trading day. After all the share trades for BT shares through the stock market on a Monday, newspapers will list the closing market price of those shares in the Tuesday editions. So market price varies on a daily basis whereas issue price is a one-off

(5. When a company is dissolved the real worth of the business is whatever market value of the shares that are called market capitalization. The buyer will see the market value of the shares of the company?) OOO! A number of questions here! Do you mean dissolved or liquidated? If you mean dissolved, this could well be (though not necessarily) as a result of another company (a ‘vulture’) buying the shares of the ‘victim’ simply to acquire the business, patents, customer lists, products … The vulture doesn’t want the company, it just wants access to the victim’s assets and, having acquired the company and thus its assets, the vulture may well dissolve the victim company. In this situation, the real worth is the amount that the vulture is willing to pay. Accordingly, the individual share value will rise to an amount equal to ‘purchase consideration divided by number of shares in issue’.

Thus, market capitalisation is arrived at as a result of the vulture’s offer and not the other way round

If you meant liquidated rather than dissolved, it is sadly the case that, on liquidation, the shares typically have little or no value, dependent upon the reason for the liquidation

The second sentence in your question ‘The buyer will see the market value of the shares of the company’. Hmmm. A vulture will identify a potential victim and internally will consider how much it would like to pay to acquire that victim. Clearly, the price per share that it must offer to be attractive to the victim’s shareholders must be greater that the market price of the share before the vulture announces its interest. Then, typically, an offer is made, rejected, counter-offered, negotiated and so on until the victim’s board of directors make a recommendation to the victim’s shareholders. Throughout this process, the market price of the victim’s shares will have been moving (probably upwards!)

So your sentence ‘The buyer will see the market value of the shares of the company’ does not really reflect the reality of the event

(6. What is share discount term mean. Does that mean that shares are issued at a issue price lower than the market price of a share?) In one word, share discount means ILLEGAL!! Yes, where the amount that a company receives in exchange for the issue of a share is lower than the NOMINAL VALUE of the share, that would be an illegal issue of shares at a discount.

HOWEVER, your question asks about ‘shares are issued at a issue price lower than the market price of a share?’ This is not illegal Shares may be issued at a discount on market value. They cannot be issued at a discount on nominal value

Is that all ok?

1 Correct
2 Correct
3 Correct – but I prefer to call it a ‘saving’ rather than a ‘discount’
4 Correct
5 Correct – although I’m not sure about the use of ‘normally’. Technically, it’s a perfectly valid, accurate statement but ‘normally’ would suggest that issue at nominal value is the norm / the usual whereas, in practice, I believe that it is extremely rare except maybe on the initial issue of shares most often in a private company context

Otherwise I believe that we are singing from the same hymn sheet! Well done 🙂