Agio stocks is a term that exists in the world of finance, for those of you who are deep in the world of finance, this term must be familiar to you. You can read more details about agio stocks in the article below!
What is Agio Shares?
Agio shares are excess capital from the existing nominal value, this excess capital is also the net worth of the company. Agio shares can also be called APIC (Additional Paid-In Capital), which occurs when an investor buys shares that have just been issued from a company during the initial public offering (IPO) stage. Agio shares can be considered as the amount of surplus or premium that the company receives from shares issued in an Initial Public Offering (IPO) above and above the issue price. It is used to represent what the investor pays above the nominal value denominated by the company on the stock. It is important to note that additional paid-up capital only occurs in the primary market; In other words, when an investor buys shares in a company directly from the company itself.
Benefits of Agio Shares
The benefits of agio shares themselves are seen as profit opportunities for companies because they result in them receiving excess cash from shareholders. APIC is a great way for companies to make money without having to provide collateral in return. Additionally, buying shares in a company's IPO can be very lucrative for some investors.
How Agio Shares Work
During its IPO, the company reserves the right to set any price for its shares that it deems suitable. Meanwhile, investors can choose to pay any amount above the nominal value of the share price, resulting in an APIC. Let's assume that during the IPO phase, XYZ Widget Company issues one million shares, with a face value of $1 per share, and investors bid for shares for $2, $4, and $10 above face value. Let's further assume that the shares were eventually sold for $11, consequently making the company $11 million. In this case, APIC is $10 million ($11 million minus a face value of $1 million). Therefore, the company's balance sheet details $1 million as "paid-up capital", and $10 million as "additional paid-up capital".
Example & How to Calculate Agio Shares
To calculate the APIC, you will need the following information:
- The issuance price at the time of the IPO;
- The nominal value set for a share by the issuing company; and
- Number of shares outstanding.
The additional paid-up capital comes from the difference between the issue price and the face value, which will give you a premium per share resulting from the issuance of shares. The premium per share is then multiplied by the number of outstanding shares to give the company's APIC value. The above relationship can be expressed by the following formula : Additional Paid-up Capital = (Issue Price – Par Value) * Number of Outstanding Shares By applying the above formula to all public offerings, you will be able to determine the APIC of an organization. See an example of how to calculate it below : To frame our understanding of APIC, we'll use a relatively new, real-world example. In early 2019, Beyond Meat Inc., a Los Angeles-based plant-based producer of meat alternatives, held an initial public offering. Pre-IPO, Beyond Meat attributed a face value of $0.0001 per share, while the issue price was $25 per share. The number of ordinary shares issued by the company during the IPO was 9.625 million shares. If combined, the additional paid-up capital of the common stock on the Beyond Meat IPO is :
APIC = ($25 – $0.0001) * $9,625,000 APIC = $240,624,037.50 Therefore, the cash raised as a result of the additional paid-up capital on the IPO associated with the common stock is $240.6 million.
Types of Agio Stocks
In addition to the explanation above, you must also understand the types of agio stocks. You can see the types below:
Agio Ordinary
As explained above, this type of agio is the difference in nominal value from the selling price. For example, the initial share per share is Rp. 5,000, then bought at a price of Rp. 8,000. So the difference from the agio value of the shares is Rp. 8,000.
Agio Treasury
Another type of agio is agio treasury, in this type the company withdraws back shares that have been sold, this activity is also called buyback stock. It is called agio treasury if the shares that have been purchased will be resold at a price higher than the nominal price.
Difference Between Agio Saham and Capital Gain
Next, the discussion of the difference between stock agio and capital gain. Each discusses 'benefits' but there is a difference between the two. Find out about the differences below. Agio shares are net worth obtained from the surplus value of sales from their nominal value. Please note that the nominal amount is determined by the issuer's company, before it is listed on the stock exchange. The price given is an agreement between the relevant underwriter and also the issuer's company. Agio shares enter and are recorded in the issuer's treasury and will be a profit or net worth for the company. In contrast to capital gains where the difference occurs in the secondary market. The difference in capital gains occurs in the primary market whose selling price is in the secondary market. In the end, the profits from capital gains are obtained by certain investors or shareholders. That's all an explanation of APIC and its difference from capital gains. Hopefully it can help you understand more deeply about APIC. You can also read our other articles by visiting the GIC
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