Issued Outstanding and Fully Diluted Shares - Explained
Written by Jason Gordon
Updated at November 28th, 2020
- Accounting, Taxation, and Reporting
-
Law, Transactions, & Risk Management
Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
- Marketing, Advertising, Sales & PR
- Business Management & Operations
- Economics, Finance, & Analytics
- Professionalism & Career Development
- Courses
What are Issued and Outstanding Shares?
As previously discussed, authorized shares are the number of shares (of any class) that are listed in the articles of incorporation. Issued shares are shares that are actually distributed to shareholders. Outstanding shares may have a little broader definition. It may include all promises or obligations to issue shares, such as options and warrants.
Next Article: What is Capitalization & How do you Calculate It? Back to: LAW, RISK, and TRANSACTIONS
What are Fully-Diluted Shares?
There are multiple options for calculating the total number of outstanding shares. The calculation may include just the issued shares, or it may include all promises or obligations to issue shares. This is known as a Fully-diluted basis for calculating outstanding shares. Fully-diluted calculation of outstanding shares includes common shares, preferred shares, warrants, options, options pool, and any convertible securities (such as convertible debt). Remember, warrants, options, and other convertible instruments will have a conversion ratio that may convert the instrument into any number of common shares. You will use the conversion to common shares ratio to calculate the total, fully-diluted number of common shares. The effect of these different methods greatly affects the ownership percentage calculation.