Why £100 of Share Capital Is Not a £100 Business
Published
A founder asks the Dragons for a six-figure investment. Later, you find a company filing showing share capital of £100. Those numbers can both be correct. They describe different things.
Share capital records the nominal value attached to issued shares. It is not a running estimate of the business's sale price. A television offer, by contrast, describes the cash and ownership terms being discussed in that pitch. Comparing the two as though they are competing valuations produces a misleading story.
Start with the number of shares
Imagine a company has 100 ordinary shares with a nominal value of £1 each. Its total nominal share capital is £100. That arithmetic says nothing about how much revenue it earns, which assets it owns or what another person might pay for part of it.
The government's shareholder guidance explains that companies can use low share values and can issue different classes with different rights. A small nominal amount is therefore not evidence that a founder secretly valued the business at only that amount.
A payment can exceed nominal value
Now suppose the company issues 25 additional £1 ordinary shares for a total payment of £100,000. Assume all 125 shares have identical rights and there are no other shares or rights to account for. The new investor holds 25 out of 125 shares, or 20%.
The nominal share capital has risen by £25, from £100 to £125. It has not risen by the whole £100,000 payment. The remaining £99,975 is the premium above nominal value in this simplified example.
That is why a modest change in a statement of capital need not reveal the size of a funding round. The legal explanation from Orrick on nominal value makes the distinction between the fixed nominal amount and a higher agreed issue price.
Check what transaction the filing describes
An allotment creates new shares. A transfer moves existing shares between owners. Those actions can have different effects on the total number of shares and on whether the company itself receives money. Seeing an investor's name later does not, by itself, tell you which route was used or establish that the televised terms were completed unchanged.
Read the document date, the share class, the number issued and the resulting total together. If more than one class exists, a simple share count may not describe voting power or economic rights. Do not convert an ordinary-share percentage into a claim about control without reading the relevant rights.
Keep three figures separate
When following a pitch, keep separate notes for the on-air cash-and-equity proposal, nominal capital in the company record and any independently reported completed investment. A filing can clarify the share structure while leaving the price or private agreement undisclosed.
If all you have is £100 of share capital, the sound conclusion is that the record reports £100 of nominal capital. It does not establish a £100 valuation, a £100 bank balance or the amount the Dragons ultimately paid.