Outstanding shares are all the shares issued and sold by a company that are not held by the company itself. Outstanding shares include a company’s common stock held by individual investors, institutional investors and restricted shares held by company officers and insiders. The category does not include treasury stock, which is the company’s own stock held by the company. Issued shares refer to those shares issued by the company over time — yet, unlike outstanding shares, the number of issued shares includes shares repurchased by the company and held as treasury stock. A reverse stock split exchanges existing shares for a proportionately smaller number of new shares.
When Can a Company Issue More Shares?
In addition, most public companies don’t need to issue more shares, at least in the number required to bump up against the authorized maximum. For many companies, however, even those executing buybacks, the number of outstanding shares and the number of issued shares is the same. Those companies buy back and retire shares, instead of holding them in the treasury. In this way, the number of both issued and outstanding shares is reduced. Moreover, the number of shares outstanding is extremely useful accounting firms in huntsville when monitoring how a company conducts its business, as things like stock splits also affect share numbers. Knowing a company’s number of shares outstanding is key when calculating critical financial metrics and determining share value as a portion of ownership.
A company must often obtain board approval and record quantities via board meeting minutes whenever it decides to issue or sell additional shares. It must prepare appropriate documentation and ensure compliance with state and federal securities laws. The most commonly used stock split ratios are 2-for-1 and 3-for-1, meaning shareholders receive two or three additional shares for every share they already own. In a 2-for-1 split, for example, the number of outstanding shares doubles while the share price is cut in half.
If a company buys back its own stock, those repurchased shares are called treasury stock. While outstanding shares are a determinant of a stock’s liquidity, the latter is largely dependent on its share float. A company may have 100 million shares outstanding, but if 95 million of these shares are held by insiders and institutions, the float of only five million may constrain the stock’s liquidity. Shares outstanding are all the shares of a corporation that have been authorized, issued and purchased by investors and are held by them. They are distinguished from treasury shares, which are shares held by the corporation itself, thus representing no exercisable rights.
While a company has a certain number of outstanding shares, not all of those shares are available for trading, since they may be closely held by some (large) investors. The shares that are available for public trading are called the company’s stock float. While the number of outstanding shares and the public float may be the same, they don’t have to be, such as in the case of one company owning the shares of another company with no plans to sell them. Lockups aside, long-standing investors such as founders or venture capital backers may have their own restrictions on selling, or may have signaled that they have no intent to do so.
What Are Shares Outstanding?
In certain cases, notably for companies that are aggressively issuing shares or debt, public data should be augmented with a reading of SEC filings. But for mature companies with relatively little movement in share count (either basic or diluted), quarterly and annual data from public sources should easily suffice for solid fundamental analysis. One key goal of the diluted share figure is to appropriately calculate earnings per share accounting for all of the potential shares out there, whether currently existing or underlying other instruments.
- A company’s outstanding shares may change over time because of several reasons.
- It can also reduce the possibility of a hostile takeover if a majority of shares have yet to be issued.
- This is because the total number of outstanding shares will change over time.
- A company’s outstanding shares, the total shares held by shareholders excluding treasury stock, can fluctuate due to various factors.
Key Takeaways
Assume that Company A has 100 million shares outstanding and a trading price of $10. It also has 10 million stock options outstanding with an exercise price of $5. In other words, the treasury stock method accounts for the cash that will come in from option and warrant exercise, and assumes that the cash received will offset a portion of the shares issued. Overall, the number of shares outstanding, the metrics you can calculate from it, and related metrics — like the float — provide key insights to investors. For example, when shares outstanding are going up, the ownership stake of shareholders is diluted.
The reason for that is that most public companies have instruments that provide for shares to be issued in the future. These instruments include stock options, stock warrants, and convertible debt. But the concept of outstanding shares is a bit more complicated than it seems. The number of shares outstanding changes over time, sometimes dramatically, which can impact the calculation for a reporting period. At any given point, instruments like warrants and stock options must be accounted for as well. A stock split occurs when a company increases the number of its outstanding shares without changing its overall market cap or value.
Shares Outstanding Vs. Float and Free Float Vs. Shares Outstanding
They determined that reducing their share count from nearly 8.8 billion to roughly 1.1 billion better aligned with this vision (1). You can find shares outstanding at the top of a company’s 10-Q or 10-K filing. Importantly, the number of shares outstanding is dynamic and fluctuates over time. When you buy stock in a company, you are buying an ownership stake, which is issued as a share of stock. Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer. The Motley Fool reaches millions of people every month through our premium investing solutions, free guidance the accounting for job order costing and market analysis on Fool.com, top-rated podcasts, and non-profit The Motley Fool Foundation.
The formula for calculating the shares outstanding consists of subtracting the shares repurchased from the total shares issued to date. Shares Outstanding represent all of the units of ownership issued by a company, excluding any shares repurchased by the issuer (i.e. treasury stock). Investors can use the number of outstanding shares to evaluate a company’s financial health and performance. It helps in calculating key financial ratios and understanding the company’s ownership distribution. For most companies, the number of authorized shares well exceeds the shares outstanding.
What is the difference between authorized shares and outstanding shares?
These statements are available on companies’ investor relations pages or the SEC website. The information is also available on stock data websites like Stock Analysis. Get instant access to video lessons taught by experienced investment bankers.
The second line from the bottom indicates the number of shares outstanding at the end of each fiscal year, and the bottom line indicates how many new shares were issued by Apple in that year. Total shares outstanding decreased from more than 21 billion in 2016 to less than 17 billion in 2020. The tech company spent billions buying back its stock during these years. Public companies must usually notify existing shareholders and call for a shareholder vote.
Here, the balance sheet reports 8,019 million shares issued and 3,901 million treasury shares, as of September 30, 2022. The shares companies issue are known as authorized shares, which are the maximum number of shares they are lawfully permitted to make available to investors. Shares outstanding is a financial number that represents all the shares of a company’s stock that shareholders, including investors and employees, currently own. According to an amendment filed on Aug. 3, 2020, Apple indicated that it is “authorized to issue one class of shares.” These shares fall under the category of its common stock. The filing also indicated that existing shares would automatically be split into four.