Shares Outstanding: Types, How to Find, and Float

Blue-chip stocks have a strong reputation for performing well and paying dividends. Lowering the number of these shares may inhibit liquidity, but it may also deter short sellers from the stock because of the difficulty of borrowing the shares. Our mission is to empower individuals to take control of their financial future by providing them with the tools and resources they need to make smarter investment decisions. We understand that navigating the world of finance can be overwhelming, especially in today’s ever-changing economic landscape.

Shares Outstanding

These shares are not considered outstanding because they do not represent ownership by shareholders outside of the company. When calculating outstanding shares, treasury shares must be subtracted from the total shares issued in order to accurately determine the number of shares owned by shareholders. Let us consider an example of a company named KLX Inc. in order to illustrate the computation of shares outstanding. During 2018, the company repurchased 0.3 million common stocks and 0.1 million preferred stocks. Based on the given information, Calculate the number of shares outstanding of the company. If you want to understand how to make money trading stocks, it’s critical to understand the different kinds of shares that companies make available.

Why shares outstanding matters

You can find the total number of shares outstanding for any company in a few ways. Authorized shares that have not yet been issued may be set aside as reserved shares. Reserved shares can be used by the company as part of future stock option plans. These reserve shares may not be issued unless it’s done under the stock option plan. The number of authorized shares can be changed by a vote from shareholders, typically during the annual shareholder meeting.

Adjusting for Stock Splits and Stock Dividends

Essentially, treasury shares are the portion of the shares that a firm keeps in its treasury. These shares come from a share repurchase program, where the firm buys back shares from the public, or these are shares that were never issued to the public in the first place. The weighted average can calculate significant financial metrics more accurately, like earnings per share for a specific period.

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2. These shares are any authorized shares, excluding treasury stock, held or sold to a corporation’s shareholders.
3. Companies may do this to increase their share price, such as if they need to satisfy exchange listing requirements or want to deter short sellers.
4. Common stock is the main class of stock that the company issues to investors.
5. For this reason, the SEC requires all public companies to report their outstanding shares in their filings to the SEC, which is public information.
6. It is a less-commonly used number in the financial reporting of privately-held businesses.

Blue Chip Stocks

Alternatively, the total number of shares outstanding can be easily calculated as a company’s market capitalization divided by the current share price. A company’s 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. While the lower number of outstanding shares often hampers liquidity, it could also deter short sellers since it becomes more difficult to borrow shares for short sales. A company can increase its number of outstanding shares through stock splits. They can also reduce outstanding shares by undertaking reverse stock splits known as share consolidations.

For this reason, the SEC requires all public companies to report their outstanding shares in their filings to the SEC, which is public information. These shares are any authorized shares, excluding treasury stock, held or sold to a corporation’s shareholders. By following the easy guide and tips provided in this article, you can accurately calculate outstanding shares and improve your investment decisions or financial analysis. Remember to double-check your calculations and be mindful of potential mistakes. Company A has 10 million shares outstanding, of which 2 million are treasury shares.

But usually you will need to pull several numbers from the balance sheet in order to calculate the total outstanding shares formula. A reverse stock split exchanges existing shares for a proportionately smaller number of new shares. Companies may do this to increase their share price, such as if they need to satisfy exchange listing requirements or want to deter short sellers. A stock split occurs when a company increases the number of its outstanding shares without changing its overall market cap or value. Outstanding shares differ from treasury shares, which are the shares held by the company itself and which cannot be sold in the open market.

There are still some places where you can find this information, other than the SEC’s website. For example, you can usually find the number of shares outstanding on investor relations webpages, which are only available for publicly listed https://www.kelleysbookkeeping.com/ companies or on stock exchanges. Adjusting for these events is necessary to accurately calculate outstanding shares and determine a company’s true value. Stock splits and stock dividends can impact the number of outstanding shares.

They are separate from treasury shares, which are held by the company itself. As noted above, outstanding shares are used to determine very important financial metrics for public companies. These include a company’s market capitalization, such as market capitalization, earnings per share (EPS), and cash flow per share (CFPS). https://www.kelleysbookkeeping.com/what-is-accounts-receivable/ The term outstanding shares refers to a company’s stock currently held by all its shareholders. Outstanding shares include share blocks held by institutional investors and restricted shares owned by the company’s officers and insiders. A company’s number of outstanding shares is not static and may fluctuate wildly over time.

Instead, the weighted average incorporates changes in the number of outstanding shares over a certain period of time. Once you have collected the total number of preferred shares, common shares outstanding, and treasury shares, you’re ready to do your calculation. Next, you’ll want to look for the common stock line item on the company’s balance sheet.

A secondary stock market offering can increase the number of outstanding shares, as can the payment of employee stock options (ESOs). Authorized shares are also referred to as authorized stock or authorized capital this is the new tax filing deadline for 2020 returns stock. 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.