What is the term for the arbitrary value placed on each share of stock prior to its sale?

Par value is the term used to describe the arbitrary value placed on each share of stock prior to its sale. This value is established by the issuing company and is typically a minimal amount, often set at a nominal figure such as $1 or even less. Par value serves as a legal accounting designation rather than a reflection of the stock's market value or inherent worth.

This concept is significant in that it establishes the minimum price at which shares can be sold initially. It also has implications for the company's financial statements and shareholder equity. In many cases, the actual market price of the stock diverges significantly from par value due to market conditions, investor demand, and the company's performance. Unlike par value, market value refers to the current price at which a stock is trading, and book value represents a company's total assets minus liabilities, providing a measure of the company’s net worth. Nominal value, while an interchangeable term in some contexts, generally does not have specific relevance in the context of stock issuance compared to par value.