Market Value Per Share Defined

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A company's market value per share is defined as the company's assessed market value divided by the total number of shares held by stock owners in the company.

Public Companies

  • For a publicly-traded company, the market value per share is simply the price for which a share of that company trades on the stock market.

Private Companies

  • For a privately-held company, calculating the market value per share requires a special assessment of the market value of the company.

Market Value of Private Companies

  • The market value of a private company can be based on the price paid by a recent outside buyer of the company's shares. In the absence of a recent transaction involving an outside buyer, a special valuation can be made to assess the market value of the business.

Importance

  • Knowing the market value per share (and market value more broadly) of a business is a legal necessity in many situations. This includes situations involving the transfer of shares as a result of inheritance or divorce.

Warning

  • Market value per share should not be confused with "book value per share." The former involves the market value (or estimated market value) of a business, while the latter involves the accounting value of a business.

References

  • Photo Credit Image by Flickr.com, courtesy of Balazs Gal
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