What Are Outstanding Shares?

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. In May 2021, technology company Nvidia announced it would initiate a four-for-one stock split—its fifth split since the company went public in 1999—of its common stock.

  1. Shares outstanding are the stock that is held by a company’s shareholders on the open market.
  2. Often, this type of stock is given to insiders as part of their salaries or as additional benefits.
  3. They are separate from treasury shares, which are held by the company itself.

It’s worth noting that a company’s basic number of shares outstanding can differ from its fully diluted number of shares. 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. From the previous example, we know that this company has 1,000 authorized shares.

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. You can compare the differences between the figures on specific dates of the filings to find the change in outstanding shares. Companies may issue shares from time to time to fund growth or to reward executives and other insiders, so the number can vary from quarter to quarter. Similarly, companies may repurchase their own stock, reducing the outstanding share count. Market capitalization is calculated by multiplying the company’s share price by its shares outstanding.

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The number of shares outstanding can impact how liquid a stock is, which in turn often affects the volatility of its price. If the float suddenly shoots up, though, it could mean that company insiders or institutional investors lack confidence in the stock or are not completely committed to managing its price. A company’s stock float does not include closely-held shares that are held by company insiders or controlling investors. These stockholders typically include officers, directors, and company-sponsored foundations. 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 formula for calculating the shares outstanding consists of subtracting the shares repurchased from the total shares issued to date.

Although the two both relate to the number of shares a public company has issued, they are distinct from one another. In short — issuing new shares of stock will raise the number of outstanding shares. Here’s what you need to know about outstanding shares and how they’re vital to determining the value of a company. A publicly-traded company can directly influence how many shares it has outstanding. Another metric calculated using shares outstanding is the price-to-book (P/B) ratio.

Finding the number of shares outstanding

The term “float” refers to the number of shares available to be traded by the public and excludes any shares held by company executives or the company’s treasury. The number of shares outstanding can (and usually does) fluctuate over time. The number of shares outstanding increases if a company sells more shares to the public, splits its stock, or employees redeem stock options. The number of shares outstanding decreases if the company buys back shares or a reverse stock split is completed. No, float—short for floating stock or floating shares—can’t be higher than shares outstanding. It’s always a smaller figure because it only counts the number of shares available for investment and trading on financial exchanges.

How to find outstanding shares

Shareholders of common stock typically possess the right to participate in annual shareholders meetings and contribute toward the election of the company’s board of directors. The number of outstanding shares may change due to changes in the number of issued shares, as well as the change in treasury shares. There are several useful public sources to find the number of shares outstanding of a given corporation. 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.

In the end, as the number of outstanding shares decreases by 1,000, the company’s EPS increases by 6.89%. It also offered 3,000 shares to each of the two managing directors and has 5,600 treasury shares. Therefore, if a company owns any diluting securities, that would indicate a potential increase in the number of shares outstanding in the future. A company’s float is an important number for investors because it indicates how many shares are actually available to be bought and sold by the general investing public.

For example, a company might authorize 10 million shares to be created for its IPO, but end up actually only issuing nine million of the shares. The seven billion floating shares are the shares considered for the free float, market capitalization index weightings. That’s because the vast majority of its shares are available to the general investing public. Investors may find it useful to compare a company’s floating stock to its outstanding shares when they’re making investment decisions. Companies may provide executives with stock options that can be converted to shares.

Like a company’s https://simple-accounting.org/, a company’s float also changes on a consistent basis. A company’s outstanding shares may change over time because of several reasons. These include changes that take place because of stock splits and reverse stock splits. There are also considerations to a company’s outstanding shares if they’re blue chips. While outstanding shares of stock are those that can be purchased or sold on the secondary market, treasury shares are those that are held by the company and are not available in the open market.

Outstanding shares also include any blocks of stock held by institutional investors, such as mutual or pension fund companies. 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.

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The basic number of shares outstanding is simply the current number of shares available on the secondary market. On the other hand, the fully diluted shares outstanding calculation takes into account diluting securities such as convertibles (warrants, options, preferred shares, etc.). While outstanding shares are a determinant of a stock’s liquidity, the latter is largely dependent on its share float.

Stock Splits

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. Conversely, the outstanding number of shares will decrease if the company buys back some of its issued shares through a share repurchase program. Preferred shares don’t usually come with voting rights, but shareholders receive dividend payments before common stockholders do. Preferred shareholders also have priority over common shareholders if the company goes bankrupt and its assets are liquidated.

If it offered 300 shares in an IPO, gave 150 to the executives, and retained 550 in the treasury, then the number of shares outstanding would be 450 shares (300 float shares + 150 restricted shares). For starters, a company’s market capitalization is determined by multiplying the current market price of one share of the corporation by the total number of outstanding shares. Market capitalization is used to compare company sizes, which helps investors evaluate risk and potential growth.

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. As you look through a company’s financial documents, don’t confuse outstanding shares with issued shares, which is a slightly different category and includes treasury stock. The number of outstanding shares is also important in calculating other financial metrics such as earnings per share. For instance, stock buybacks may increase the value of the remaining shares of stock and improve metrics such as earnings per share because there are fewer shares outstanding. Because the difference between the number of authorized and outstanding shares can be so large, it’s important to realize what they are and which figures the company is using.

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