Outstanding Shares: Definition, How it Works, Calculations

The outstanding shares are held by all of the company’s stockholders including institutional investors, private investors, restricted stockholders, company insiders, and the general public. For example, the outstanding stocks will increase when a firm increases its share capitalby selling more stock to the public or when it declares a stock split. Conversely, it will decrease if a firm completes a share buyback or a reverse split. Issued shares encompass all a company has created and distributed to its stockholders.

The float and shares outstanding increase and the number of treasury stocks decreases every time one of these instruments is activated. A stock split occurs when a company increases its shares outstanding without changing its market cap or value. Shares outstanding how the face value of a bond differs from its price is the total number of shares a company has released to the public and its insiders, including employees, executives and founders. To determine the number of shares outstanding, you subtract the amount of treasury shares from the authorized shares. In the event an employee exercises their stock options of a stock buyback or when new shares of stock float on the stock market, the number of outstanding shares naturally changes. However, shares bought back and held by the company are called treasury stock or treasury shares and aren’t included in earnings per share computations.

Outstanding shares refer to the entire number of issued and owned shares of a company’s stock by investors, including institutional investors, insiders, and retail investors. Insiders hold restricted shares not available for public trading, and openly traded shares make up outstanding shares. Outstanding shares refer to the total number of company stocks currently issued and held by its stockholders. The company’s outstanding shares remain in circulation, as the company has neither repurchased, retired, nor removed them from the market.

Why does a company need to report the Total Number of Outstanding Shares?

Blue chip stocks refer to stocks of well-established, financially stable companies with a long history of consistent performance and dividend payments. These stocks usually have a high number of outstanding shares because the company has previously issued more shares to raise capital, reward shareholders or conduct mergers and acquisitions. Blue chip stocks are considered a safe and reliable investment option as they can offer steady returns and lower volatility than other stocks. Market capitalization is the total value of a company’s equity in the market, calculated by multiplying the current share price by the number of shares outstanding.

What affects a company’s total outstanding shares?

You can calculate an estimate of outstanding shares by dividing the market capitalization or total market value of equity by the current share price. The number of outstanding shares influences market capitalization, a critical metric for valuing companies. Investors use outstanding shares to gauge a company’s size and compare it with peers. A significant change in outstanding shares, such as through a stock buyback or issuance, can signal strategic shifts and impact investor sentiment.

Market capitalization is a helpful tool for comparing a company’s size and growth potential to its competitors. Outstanding and treasury shares are two distinct terms relating to a company’s equity. Outstanding shares refer to the total number of shares issued and currently held by shareholders.

How to find the Total Number of Outstanding Shares of the Company?

But the supply of shares in the market can have a bearing on trading dynamics. Convertible debt is treated on an “as-converted” basis if the company’s stock is trading above the conversion price. 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.

What Are Outstanding Shares (Explained: All You Need To Know)

A discussion of shares outstanding includes understanding restricted shares and float. Restricted shares are those shares owned by insiders not available for trading on the market. The founders or top executives of a company may own significant quantities of shares that won’t be available for sale on the open stock market. Outstanding shares is a stock market term that helps investors understand the value of a publicly traded company when looking at company filings, such as balance sheets.

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• The float is by definition the shares not restricted and not owned by company insiders.
• For example, the difference between the number of shares currently outstanding and the number of shares fully diluted is comparatively likely to be significant for fast-growing technology companies.
• This is because short sellers, when choosing to cover, can only buy the shares actually in the float.
• Stock splits are often initiated to lower the share price, making it more accessible to retail investors and enhancing market liquidity.
• On the other hand, outstanding shares refer to the total number of issued and owned shares of a company, excluding treasury shares.
• For a loss-making company, the diluted share count will reduce loss per share, since the net loss is being spread over a larger amount of shares.

A company with a high number of shares outstanding will have a lower EPS, which may negatively affect its attractiveness and stock price. There is a relationship between authorized and outstanding shares, although they represent different characteristics of a company’s stock. The number of outstanding shares can never surpass the maximum number of authorized shares. A company cannot issue further shares without modifying its articles of formation if it reaches its approved share limit.

On the other hand, Treasury Shares are repurchased by the company and retained in its own treasury. Treasury Shares represent the company’s ownership of its stock, while outstanding shares represent the ownership interest of shareholders. Understanding how outstanding shares work is critical for investors to make informed stock purchase or sale choices and for companies to regulate their capital structure and attract investment. The number of outstanding shares impacts a company’s ability to generate capital through future stock issuances, as well as its liquidity and ability to buy back shares. Outstanding shares work in the same manner that when a company decides to issue stock, it produces new shares that investors can buy and sell.

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. Understanding how to calculate outstanding shares for a public company would appear to be a simple matter. The image below shows a section of Apple’s (AAPL -7.28%) balance sheet from 2016 through 2020.

Stock Splits

There are also considerations to a company’s outstanding shares if they’re blue chips. Companies typically issue shares when they raise capital through equity financing or when they exercise employee stock options (ESOs) or other financial instruments. Outstanding shares decrease if the company buys back its shares under a share repurchase program. You can calculate the outstanding shares using two numbers – the total number of shares issued by the company and treasury shares held by the company’s investors. After you have the total shares issued and treasury shares, you can use the formula to compute the number of outstanding shares. In a stock split, a company exchanges its stock for more shares (in a forward split) or fewer shares (in a reverse split).

Non-voting shares, also known as preferred shares, typically offer a fixed dividend payout and no voting rights in company matters. For example, Berkshire Hathaway’s Class B shares are non-voting and offer lower voting rights than their Class A shares. Management shares may be subject to limitations or conditions, such as vesting periods or trading prohibitions. A company can issue seven different types of shares, depending on its specific needs and aims. These are two key measures investors use to gauge a company’s performance and value.

• Deferred shares benefit investors, particularly in terms of higher potential returns and lower risk of dilution.
• The article was reviewed, fact-checked and edited by our editorial staff prior to publication.
• On the other hand, float stock refers to the quantity of publicly-tradable shares of a company’s stock.
• Of course, merely increasing the number of outstanding shares is no guarantee of success; the company has to deliver consistent earnings growth as well.
• Outstanding and treasury shares are two distinct terms relating to a company’s equity.
• The reason for that is that most public companies have instruments that provide for shares to be issued in the future.

In two months, the company’s management decides a share buyback of 1,000 shares. Management shares can provide certain advantages for investors, particularly regarding interest alignment, expertise, experience, and stability. On the other hand, investors should also carefully evaluate the potential disadvantages of management shares, such as conflicts propeller industries competitors revenue alternatives and pricing of interest and a lack of responsibility. Deferred shares benefit investors, particularly in terms of higher potential returns and lower risk of dilution.

Video – Stockholders’ Equity

Changes in shares outstanding over time also reveal how valuable shares are as 7 best purchase order software reviews and pricing a stake of ownership in the company, as the number of shares available directly affects this. Many companies decide to do a stock split to make their stock more affordable for a broader range of investors and to improve liquidity. The first of these, unrestricted shares, is also known as “the float.” These are the shares that can be actively traded on the open market. For example, a company may issue additional shares to raise the capital it needs to finance its business. The earnings per share allow you to calculate how much the company has generated in revenues on a per-share basis (this allows you to better compare companies in the same industry). Note that as the number of outstanding stock decreases by 1,000, the company’s EPS increases by 6.54%.

The float is by definition the shares not restricted and not owned by company insiders. Many financial news and brokerage sites also directly list the number of outstanding shares for particular companies, so you may be able to look up the current number without doing this calculation. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories, except where prohibited by law for our mortgage, home equity and other home lending products. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range, can also impact how and where products appear on this site.