The number of outstanding or issued shares is always equal to or less than the total number of authorized shares. Companies often intentionally keep these two figures different so the organization has future flexibility to sell more shares in the future should it have financing needs. The buyback increases the market value of the existing shares in the open market. It also raises the company’s earnings per share figure (EPS) since earnings are divided by a smaller number of shares.

A company may announce a stock split to increase the affordability of its shares and grow the number of investors. For instance, a 2-for-1 stock split reduces the price of the stock by 50%, but also increases the number of shares outstanding by 2x. The total number of outstanding shares can fluctuate over time due to corporate actions such as share buybacks or new share issuance. Share buybacks occur when a company repurchases its own outstanding shares from investors, which reduces the total number of outstanding shares. This can be a way for a company to return cash to its shareholders or to signal that the company’s management believes its shares are undervalued.

On the other hand, new share issuance occurs when a company issues additional shares of stock to raise capital. This increases the total number of outstanding shares, which can dilute the value of existing shares. Dilution occurs because the same amount of earnings is now divided among a larger number of shares. Ownership of a corporation can be measured by identifying which investors were issued shares at a company’s startup or via a secondary offering. Alternatively, the total number of shares outstanding can be easily calculated as a company’s market capitalization divided by the current share price. The number of shares outstanding increases when a company issues additional shares or when employees exercise stock options.

A recent example of a reverse stock split is General Electric’s (GE) 1-for-8 reverse stock split during the summer of 2021. Other companies may explicitly list their outstanding shares as a line item in the equity section of their balance sheet. The shares companies issue are known as authorized shares, which are the maximum number of shares navigating freelance taxes in 2020 they are lawfully permitted to make available to investors. It may be more difficult for a shareholder to sell shares quickly, thus taking a larger loss than desired if the stock price drops. The float, also called the free float or the public float, represents the subset of shares outstanding that are actually available to trade.

Shares Outstanding vs. Floating Stock: What’s the Difference?

Moreover, the number of shares outstanding is extremely useful when monitoring how a company conducts its business, as things like stock splits also affect share numbers. Several factors can cause a company’s number of outstanding shares to rise or fall, with one of the most common being stock splits. If a company considers its stock to be undervalued, it has the option to institute a repurchase program. It is important to note that outstanding shares do not include treasury shares, which are shares that a company has repurchased but not retired. Treasury shares are considered a separate category and are not included in the total number of outstanding shares.

Duration measures how the prices of bonds or other fixed-income investments may be affected by changes in interest rates. Due diligence is the process of investigating something, usually a potential investment or plan for the future, to ensure that you know all of the details and risks before making a commitment. Knowing the number of shares a firm has outstanding is significant for a couple of reasons. Shares outstanding is just the amount of all the company’s stock that’s in the hands of its stockholders. Learn about investing, trading, retirement, banking, personal finance and more. Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader.

This value changes depending on whether the company wishes to repurchase shares from the market or sell out more of its authorized shares from within its treasury. This section provides the sum of the total authorized shares, the total number of shares outstanding, and the total floating shares. While shares outstanding account for company stock that includes restricted shares and blocks of institutional shares, floating stock specifically refers to shares that are available for trading. Floating stock is calculated by taking outstanding shares and subtracting restricted shares. Restricted stock are shares that are owned by company insiders, employees and key shareholders that are under temporary restriction, and therefore cannot be traded. As the name suggests, the opposite effect occurs with a reverse stock split.

The measure is then often reviewed at the following shareholder meeting. By changing the number of authorized shares, existing shareholders do not receive any compensation or existing shares. 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.

  • A buyback announcement usually gives stocks a boost because traders tend to view buybacks as bullish catalysts.
  • If you’re looking at buying stock, you can find this information is available on financial statements and through stock exchange websites.
  • This keeps the market capitalization, the total value of the company, the same — while increasing the number of shares outstanding.
  • These reserve shares may not issue the shares unless under the stock option plan.
  • Large companies may be saddled with debt, have limited growth prospects, and a multitude of other problems that come with operating on a larger scale.

Outstanding shares that are not restricted comprise the company’s floating stock. One is that knowing the shares outstanding can help investors find the market capitalization (total value) of a business. Multiply the share price by the number of shares outstanding to find a company’s market capitalization. A stock split occurs when a business divides its existing shares into multiple new shares. This keeps the market capitalization, the total value of the company, the same — while increasing the number of shares outstanding. Shares outstanding can be calculated as either basic or fully diluted.

What are share repurchase programs?

The weighted average shares outstanding figure smooths out this variance, by simply averaging the share count across the reporting period. This is a figure calculated by the company itself; investors literally do not have the access to the data required. 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. For most companies, the number of authorized shares well exceeds the shares outstanding. 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.

Finding the number of shares outstanding

For example, if a startup company issues 10 million shares out of 20 million authorized shares to an owner, and the owner’s shares are the only ones issued, the owner has 100% of the corporation. During a share buyback, the company buys its own shares from the shares outstanding and turns them into treasury shares. To issue more shares, the company would have to first increase the number of authorized shares. StocksToTrade makes it easy to view both a company’s stock float and shares outstanding. They’re also known as stock float and include both common and preferred shares. In this case, XYZ has 16,000 outstanding shares (the treasury shares are not counted).

Shares outstanding Definition

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. Authorized shares represent the maximum number of shares a company can issue.

Every stock that the business sells to investors becomes a share issued. Publicly traded firms list the number of shares outstanding on their balance sheets. Companies must provide regular reports of their balance sheet to investors as well as federal regulators like the Securities Exchange Commission (SEC). Two different ways to analyze a company through its shares outstanding are earnings per share (EPS) and cash flow per share (CFPS). Authorized shares refer to the largest number of shares that a single corporation can issue.

It’s always a smaller figure because it only counts the number of shares available for investment and trading on financial exchanges. In addition to listing outstanding shares or capital stock on the company’s balance sheet, publicly traded companies are obligated to report the number of issued along with their outstanding shares. These figures are generally packaged within the investor relations sections of their websites, or on local stock exchange websites.

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. In contrast, if a company is buying back shares, it may signal that the company’s management believes its shares are undervalued and that it is a good investment opportunity.

Market capitalization, also known as market cap, is a monetary value that changes every day as the share price of a company changes every day. Because companies vary in size, market cap values are divided into categories to help simplify company valuation. The term ‘outstanding shares’ does not equal the float, which does not include shares owned by insiders and officers or restricted shares. Some investors perceive companies with a low level of floating stock as more volatile because there are fewer shares that trade on the market, and a catalyst can quickly drive the price up or down.

Different Classes of Share Issuances

Companies with a market cap of $2 billion to $10 billion are mid-cap, and anything larger than $10 billion is considered large-cap. Large-cap companies are the big ones, such as General Electric (GE), Apple (AAPL), or Starbucks (SBUX). This video explains several types of stocks and how they are presented in a balance sheet, including shares outstanding. In the end, as the number of outstanding shares decreases by 1,000, the company’s EPS increases by 6.89%. 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.