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LSDefine
Simple English definitions for legal terms
book-value stock
Read a random definition: valuation
A quick definition of book-value stock:
A book-value stock is a type of stock that is offered to executives at a price based on the company's book value, rather than its market value. This means that executives can buy the stock at a lower price and then sell it back to the company at a higher price once the book value has increased. It is a way for companies to incentivize their executives and reward them for their contributions to the company's success.
A more thorough explanation:
Book-value stock is a type of stock that is offered to executives at a price based on the company's book value, rather than its market value. This means that executives can buy the stock at a lower price than what it is worth on the market. The company then agrees to buy back the stock at the increased price when its book value rises, or make payments in stock equal to the increased price.
For example, if a company's book value is $10 per share and the market value is $15 per share, executives can buy the stock at $10 per share. If the book value rises to $12 per share, the company will buy back the stock at $12 per share or make payments in stock equal to $12 per share.
This type of stock is offered to executives as an incentive to stay with the company and work towards increasing its book value. It also allows executives to benefit from the company's success without having to pay the full market price for the stock.