The Basics of Outstanding Shares and the Float

These shares would then count as issued shares but not as outstanding shares. Alternatively, outstanding shares are issued shares minus any shares in the treasury. To understand the calculation of outstanding shares, let us take an example of a company that has recently issued 1000 shares. Out of these, 600 shares are issued as floating shares for the public, and 200 shares are issued as restricted shares to the company insiders.

How a change in shares outstanding can affect crucial financial ratios

Although the two both relate to the number of shares a public company has issued, they are distinct from one another. The float, also called the free float or the public float, represents the subset of shares outstanding that are actually available to trade. 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. Outstanding shares are the shares in the hands of the public, executives and employees. They are the number of shares actually owned by the company’s shareholders. Here’s how to find out how many shares of a company’s stock are owned by all investors.

• In other words, it doesn’t include shares that are closely held or restricted stock.
• Outstanding shares are an important aspect of stock market trading as they have a direct impact on the company’s market capitalization and shareholder equity.
• Next, you’ll want to look for the common stock line item on the company’s balance sheet.
• They are separate from treasury shares, which are held by the company itself.
• But the supply of shares in the market can have a bearing on trading dynamics.

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But there are several other parameters that investors should analyse before investing in a company. Authorized shares are those a company’s founders or board of directors (BofD) have approved in their corporate filing paperwork. Issued shares are those the owners have decided to sell in exchange for cash, which may be less than the number of shares actually authorized. This “issued” stock can be less than the total authorized, but it can never be more.

• Learn about stocks that will split in 2024 and why a company might decide to do a stock split.
• Restricted stock are shares that are owned by company insiders, employees and key shareholders that are under temporary restriction, and therefore cannot be traded.
• Another metric calculated using shares outstanding is the price-to-book (P/B) ratio.
• 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.
• 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.
• Assume that Company A has 100 million shares outstanding and a trading price of $10.
• Many companies buy back shares as part of their capital allocation strategy.

Why shares outstanding matters

If the company has not bought back shares from investors and does not have treasury shares, this line item won’t show up on the balance sheet. Once you’ve located the number of treasury stocks, write it down for your calculations. Some companies’ balance sheets list the common shares outstanding straight out. If that’s the case, congratulations, you don’t need to do any calculations. But usually you will need to pull several numbers from the balance sheet in order to calculate the total outstanding shares formula.

Example calculation

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Just take the market capitalization figure and divide it by the share price. The result is the number of shares on which the market capitalization number was based. Corporations have a certain number of authorized shares of common or preferred stock. However, just because a corporation is authorized to issue stock doesn’t mean that it has to issue all of those shares.

What are Issued Shares?

These include changes that take place because of stock splits and reverse stock splits. There are also considerations to a company’s outstanding shares how to find the number of outstanding shares if they’re blue chips. In a stock split, a company exchanges its stock for more shares (in a forward split) or fewer shares (in a reverse split).

Why shares outstanding is useful

Authorized shares represent the third share-number metric that investors often look at to get a comprehensive overview of a company’s stock shares. These are the maximum number of shares that a corporation is legally permitted to issue. This category includes already-issued stock along with shares that have the management’s approval but have not, yet, been released onto the trading market—including stock options. Outstanding shares impact a company’s market capitalization, which is calculated by multiplying the stock price by the number of outstanding shares. Changes in the number of outstanding shares can affect the stock price by altering supply and demand dynamics.

Understanding Issued Shares

• Issued shares include the stock a company sells publicly to generate capital and the stock given to insiders as part of their compensation packages.
• Issued shares are the subset of authorized shares sold and held by the shareholders of a company, whether they are insiders, institutional investors, or the general public.
• In a 1-for-2 reverse split, however, the number of shares is divided by two, while the share price doubles.
• For example, a company may retain authorized shares to conduct a secondary offering later, sometimes called a tender offer, or use them for employee stock options.
• Outstanding shares are the shares that have been issued and are currently held by investors.
• A recent example of a reverse stock split is General Electric’s (GE) 1-for-8 reverse stock split during the summer of 2021.

Several factors can cause a company’s number of outstanding shares to rise or fall, with one of the most common being stock splits. To calculate the weighted average of outstanding shares, multiply the number of outstanding shares per period by the proportion of the total time covered by each period. Then, add those terms together to get the weighted average number of outstanding shares. You can compare the differences between the figures on specific dates of the filings to find the change in outstanding shares.