Why book value per share (BVPS) matters to a first-time founder
Preference shareholders often have a prior claim on equity. This measure takes that claim out and divides what remains by the number of ordinary shares. American papers call those shares common shares and call the prior class preferred stock. The subtraction stops the preference claim being treated as if it belonged to the ordinary holders. The result is still an accounting amount, not a sale price.
Examples of book value per share (BVPS)
A company in Warsaw reports equity of PLN 8 million, of which PLN 2 million is preference share capital, and it has 1 million ordinary shares. Book value per common share is PLN 6, because PLN 8 million minus PLN 2 million, divided by 1 million, is PLN 6. Dividing the full PLN 8 million by 1 million would show PLN 8 and hide the preference claim. An offer of PLN 10 a share is a market bid, not book value restated.
Common misunderstanding
Do not leave preference capital in the equity figure, divide by ordinary shares, and call the result book value per common share. That larger number answers a different question. Do not put the market price in place of the accounting figure either. Common here means the ordinary class, not shares in general. Each other class needs its own figure.
When to use it
Use it when the company has preference shares, or when an investor asks for book value per ordinary share. Show the subtraction. If there is only one class and no preference capital, say so. On that same share count the figure then matches book value of equity per share.