How to calculate outstanding shares

Reserved shares can also be issued via stock warrants to a third party. Companies also may hold back authorized shares as a defensive maneuver. A company can maintain a controlling interest by retaining authorized shares. It can also reduce the possibility of a hostile takeover if a majority of shares have yet to be issued.

The number of outstanding or issued shares is publicly disclosed through required regulatory filings for public companies. 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. Alternatively, the total number of shares outstanding can be easily calculated as a company’s market capitalization divided by the current share price. Companies can use the float to calculate a company’s free float market cap. Remember, this method doesn’t include any locked-in or restricted shares.

You may also see outstanding shares used as a variable in financial ratios, making them important for fundamental analysis. You can also find information on a company’s total outstanding shares by searching the Electronic Data Gathering, Analysis, and Retrieval System (EDGAR), which is operated by the Securities & Exchange Commission (SEC). 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.

This is because short sellers, when choosing to cover, can only buy the shares actually in the float. And so in theory (and often in practice), highly-shorted stocks with a low float present ripe conditions for a so-called “short squeeze”. 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. Options and warrants are one aspect of the difference between basic shares outstanding and diluted shares outstanding. Like price, the percentage of company ownership expressed in each share is also reduced whenever more shares are created.

Outstanding Shares vs. Float

There are also considerations to a company’s outstanding shares if they’re blue chips. A company’s number of shares outstanding is used to calculate many widely used financial metrics. Market capitalization — share price times number of shares outstanding — and EPS are both computed using a company’s number of outstanding shares. The number of shares outstanding for a company is equal to the number of shares issued minus the number of shares held in the company’s treasury.

The total number of issued shares is the sum of the outstanding shares and the treasury shares. Public reports in which companies list the total outstanding shares include a quarterly or annual report or a balance sheet. These reports often can be found on a company’s investor relations page.

  • For example, a company may retain authorized shares in order to conduct a secondary offering later, sometimes called a tender offering, or hold them for employee stock options (ESO).
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  • And so our company has a basic share count of 100 million — but a diluted share count of 205 million (100 million basic + 5 million options and warrants + 100 million in shares from the $500 million in convertible debt).
  • They are separate from treasury shares, which are held by the company itself.

Shares outstanding is just the amount of all the company’s stock that’s in the hands of its stockholders. The larger stock market is made up of multiple sectors you may want to invest in. Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master’s in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses.

What are outstanding shares?

They are actively held by stockholders—both outside investors and corporate insiders, such as the company’s management team and other employees. Outstanding shares also include any blocks of stock held by institutional investors, such as mutual or pension fund companies. As the name suggests, the opposite effect occurs with a reverse stock split. A 1-for-10 reverse stock split means the number of shares outstanding is one-tenth the original; a 1-for-4 reverse stock split means the total is one-fourth the pre-split level, and so on. Investors can look at any number of metrics to make their investment decisions.

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.). Shares outstanding are useful for calculating many widely used measures of a company, like its market capitalization and earnings per share (EPS). Companies may provide executives with stock options that can be converted to shares.

Authorized Shares vs. Shares Outstanding

Common shares represent ownership interest in a company, and they typically come with voting rights and cash flow (dividend) rights. Here’s what you need to know about the different share counts that publicly traded companies use, as well as how you can calculate the number of outstanding common shares. The company must first have authorized shares that haven’t yet been issued or have a plan in place to increase the number of authorized shares if that’s not the case. Finally, it must be able to comply with state and federal securities regulations for the issuance. Holders of outstanding or issued shares typically have voting rights and receive dividend distributions when applicable. The total number of outstanding shares can’t be greater than the total number of authorized shares as laid out in a company’s articles of incorporation.

Issued Shares

Another metric calculated using shares outstanding is the price-to-book (P/B) ratio. However, due to the fluctuations in share counts between reporting periods, the figure is typically expressed as a weighted average. The number of shares outstanding of a company can be found in its quarterly or annual filings (10-Qs or 10-Ks). In short — issuing new shares of stock will raise the number of outstanding shares. Shares outstanding are the basis of several key financial metrics and can be useful for tracking a company’s operating performance. Some experts have also said that many retail traders cashed out during the brutal bear market of 2022, unable to stomach steep losses.

A share repurchase generates a higher income per share, making each share more valuable. 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. In the above example, if the reporting periods were each half of a year, the what is the direct write off method resulting weighted average of outstanding shares would be equal to 150,000. Thus, in revisiting the EPS calculation, $200,000 divided by the 150,000 weighted average of outstanding shares would equal $1.33 in earnings per share. While outstanding shares are a determinant of a stock’s liquidity, the latter is largely dependent on its share float.

When a company buys back its own shares, that stock is accounted for as “treasury stock” on the company’s balance sheet. Treasury stock is no longer outstanding — the company itself now owns it, not an investor or employee — but that stock has still been issued. Basic shares outstanding represent the actual number of shares outstanding during a period. Diluted shares outstanding include “dilutive” securities that could add to the share count — including options, warrants, and convertible debt.

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