Issued and Outstanding Shares - Explained
What are Issued and Outstanding Shares?
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Table of ContentsWhat are Issued Shares?What are Outstanding Shares?What are Fully-Diluted Shares?Academic Research on Issued and Outstanding Shares
What are Issued Shares?
Issued shares refer to the totality of a company's shares that have been issued or allocated to the company's shareholders, this number of shares are recorded in the company's annual report. Issued shares are shares of a company that have been given to shareholders either as a form of compensation or during issuance of shares. Shares held by shareholders which comprises of investors, company insiders, institutional investors and the general public are issued shares. In certain cases, a company can buy back its shares issued to investors and keep as treasury shares. Shares that a company holds in its treasury stock or retired shares are not part of issued shares.
What are Outstanding Shares?
The number of shares that a company issues or allocates to its shareholders are recorded as capital stock or owners equity in the company's balance sheet. When calculating market capitalization or when the financial statement of a company is being compiled, issued shares are important. A company's outstanding shares are also recorded under capital in an annual report and listed when doing quarterly filings with the SEC. The holdings or portion of the ownership of a company that shareholders maintain can be determined through the number of shares they hold. All issued and authorized shares of a company are used when calculating the ownership of a company. Issued shares are important when evaluating the ownership of a company, the shareholders of a company maintain a share of the company's ownership. Investors or shareholders who were issued shares through a secondary offering or those that purchased shares when a company starts can claim a portion of the company's ownership. Using the fully diluted calculation or method, a company's ownership can be estimated.
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.