Additional Paid in Capital (APIC) Definition

Chris Haynes

Reviewed by

Chris Haynes WSO Editorial Board

Expertise: Asset Management | Investment Banking | Venture Capital

Additional Paid In Capital is an accounting term found on the Balance Sheet under Shareholder's Equity. It is the value of the shares of the company above what they were issued it.

Abbreviation: What does APIC stand for?

APIC is short form for additional paid in capital.

Paid in Capital Formula

The formula is:

  • (Issue Price - Par Value) x Basic Shares Outstanding

Calculate Additional Paid in Capital

Here's one example of an Additional Paid in Capital calculation. If a company issues 1,000 shares at $10 each and then investors buy the shares for $25 each, Additional Paid In Capital is (25-10)x1000 = $15,000.

A good real world example of this is Facebook. The IPO price for Facebook was set at $38 with 421m shares issued. However, on IPO day the stock price shot up to around $45 and finally settled at $38.23. To calculate the APIC for Facebook on its IPO date we need to know several things:

  • Exactly how many shares were sold to investors
  • The price that each share was sold for

Example of APIC in Finance

APIC is an abbreviation for additional paid in capital. In practice for this definition, we do not have this information so I will make an assumption that all 421m shares sold to investors for an average price of $40 (slightly below the halfway mark because trading was very weak towards the end of the day).

The calculation here is (40 - 38) x 421m = 842m. This means that Facebook received an additional $842m above the par value of it's shares and this would be booked as APIC. Again, these are estimate numbers for volume and average price so don't focus on the numbers, just the concept.

The video helps to explain the concept of APIC in the context of financial accounting.

Additional Points on APIC and Stock

An important point about APIC is that secondary trading (between investors) does not have any impact as none of the money comes to the company. It is only when investors buy the shares from the company directly, usually through an IPO or capital raise.

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Chris Haynes is a member of WSO Editorial Board which helps ensure the accuracy of content across top articles on Wall Street Oasis. Chris currently works as an investment associate at a strategic healthcare venture fund. Previously, Chris served as an investment analyst with New Holland Capital and as an investment banking analyst in SunTrust Robinson Humphrey's Financial Sponsor Group. Chris graduated Magna Cum Laude from the University of Florida and earned a Master of Finance (MSF) from Washington University in St. Louis This content was originally created by member and has evolved with the help of our mentors.