What is common stock outstanding?

Shares outstanding are the stock that is held by a company’s shareholders on the open market. Along with individual shareholders, this includes restricted shares that are held by a company’s officers and institutional investors. A company's statement of comprehensive income outstanding shares decrease when there is a reverse stock split. A company generally embarks on a reverse split or share consolidation to bring its share price into the minimum range necessary to satisfy exchange listing requirements.

Dividing the number of shares to be purchased by the number of shares outstanding reveals the percentage of ownership that the investor will have in the business after the shares have been purchased. When companies consider their stocks to be undervalued, they often initiate a share repurchase program, buying back some of their issued shares at a favorable price. The number of shares outstanding can impact how liquid a stock is, which in turn often affects the volatility of its price. Shares outstanding are used to determine a company’s market capitalization, i.e. the total value of a company’s equity, or equity value. The term shares outstanding is defined as the total number of shares a company has issued to date, after subtracting the number of shares repurchased. From there, simply scroll down until you find the section in the 10-Q or 10-K called "Capital Stock." All the details you need will be there, plain to see.

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. The formula for calculating the shares outstanding consists of subtracting the shares repurchased from the total shares issued to date. The number of outstanding shares can be found on a company's most recent quarterly or annual filing with the Securities and Exchange Commission (SEC), usually on its balance sheet in the shareholders' equity section. The calculation for common stock outstanding can seem a little daunting at first simply because there's so much accounting jargon used to define and calculate it. And now that you're equipped with this foundation of knowledge, all you need to do to figure it out is to go look it up on any company's balance sheet in their 10-Q or 10-K filing. Authorized shares are those a company’s founders or board of directors (B of D) have approved in their corporate filing paperwork.

  • It's always a smaller figure because it only counts the number of shares available for investment and trading on financial exchanges.
  • Companies can use the float to calculate a company's free float market cap.
  • The number of outstanding shares equals stock issued, minus treasury stock.
  • The fully diluted number of shares indicates how many outstanding shares there could potentially be if all existing equity instruments were converted into common stock.
  • The number of outstanding shares is also important in calculating other financial metrics such as earnings per share.

The number of shares of common stock outstanding is a metric that tells us how many shares of a company are currently owned by investors. This can often be found in a company's financial statements, but is not always readily available — rather, you may see terms like "issued shares" and "treasury shares" instead. Besides, it can be helpful to understand where the numbers you're looking at came from.

Example of Shares Outstanding vs. Floating Stock

Understanding how to calculate outstanding shares for a public company would appear to be a simple matter. It is important to note that shares of a corporation held by its subsidiaries is not considered treasury stock, even though paying dividends to these shares essentially constitutes the corporation paying money to itself. Company A may own over 90 percent of Company B's stock, making B a subsidiary of A.

In a 1-for-2 reverse split, however, the number of shares is divided by two, while the share price doubles. Reverse stock splits often happen when a company needs to keep its share price above a certain level in order to remain in compliance with an exchange’s listing requirements. Knowing the difference between authorized shares and outstanding shares is important for calculating important ratios that accurately reflect the financial status and stability of a company. Companies will sometimes keep authorized shares in reserve so that they can sell more shares in the future when capital is needed. The number of outstanding or issued shares is always equal to or less than the total number of authorized shares.

Issued shares are those that the owners have decided to sell in exchange for cash, which may be less than the number of shares actually authorized. 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. The outstanding shares figure is useful to know for an investor that is contemplating buying shares in a company.

  • The outstanding shares figure is useful to know for an investor that is contemplating buying shares in a company.
  • Outstanding shares are one of three classifications of the share count.
  • 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.
  • It excludes closely held shares, which are stock shares held by company insiders or controlling investors.

Of course, merely increasing the number of outstanding shares is no guarantee of success; the company has to deliver consistent earnings growth as well. The number of shares outstanding increases whenever a company undertakes a stock split. Stock splits are usually undertaken to bring the share price of a company within the buying range of retail investors; the increase in the number of outstanding shares also improves liquidity. When a company issues too many additional shares too quickly, existing shareholders can be hurt. It can also imply a certain level of risk depending on the reasoning for issuing more shares. Knowing the number of shares outstanding, especially when compared to similar firms, can help you protect your investments.

Shares Outstanding Vs. Float and Free Float Vs. Shares Outstanding Copied Copy To Clipboard

Authorized shares, meanwhile, are the maximum number of shares a company can issue, based on its corporate charter. The life of common stock goes through a few phases, and understanding each step is important for putting the common-stock-outstanding number into proper perspective. In the third quarter, the bottom 50% of households held $4.8 trillion of real estate assets, but just $0.3 trillion worth in stocks, Fed data shows.

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These are the maximum number of shares that a corporation is legally permitted to issue. This category includes already-issued stock along with shares that have the management's approval but have not, yet, been released onto the trading market—including stock options. For a blue chip stock, the increased number of shares outstanding due to share splits over a period of decades accounts for the steady increase in its market capitalization and concomitant growth in investor portfolios.

Understanding outstanding shares

Generally, both of these figures can be found on a company's balance sheet. Shares that are issued or sold to investors from the available number of authorized shares are known as outstanding shares. Usually, these shares trade in the secondary market on public exchanges. Shares outstanding refer to a company's stock currently held by all its shareholders, including share blocks held by institutional investors and restricted shares owned by the company’s officers and insiders. Authorized shares represent the third share-number metric that investors often look at to get a comprehensive overview of a company’s stock shares.

Companies may issue different classes of shares, the most common being “common” or “ordinary shares.” The different types of shares denote different rights for the shareholder. For example, shares may come with or without the power to vote on board appointees and other corporate matters. Depending upon the class of share, a shareholder may or may not have the right to receive dividend payments or participate in capital distribution upon dissolution of the company. A company is limited to issuing only the quantity of shares it's authorized to issue. Issuing more breaches compliance with securities laws and regulatory agencies will often consider the excessive issuance of improperly authorized shares as void.

In other words, authorized shares are the total number of shares that companies can legally issue or sell to investors. Outstanding shares are the total number of shares that are held by shareholders. The number of authorized shares can be substantially greater than the number of shares outstanding since authorized shares represent the maximum possible number of shares a company can issue. The outstanding number of shares may be either equal to or less than the number of authorized shares.

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