Back To: BUSINESS ENTITIES, CORPORATE GOVERNANCE, & OWNERSHIP

What are Outstanding Shares?

The outstanding shares of a company refers to the total amount of shares that have been authorized, issued, and purchased by the shareholders of the company. Outstanding shares are shares of a company held by its shareholders, the outstanding shares of a company comprises of those held by institutional investors. The number of shares that company insiders and officers own is also part of the outstanding shares of the company. For accounting purposes, outstanding shares are recorded as capital stock. Shareholders who hold the outstanding shares of a company have claims to the ownership of the company.

How are Outstanding Shares Used?

The treasury stock that a company holds as well as its authorized shares held by the company's shareholders make up the outstanding shares of the company. Restricted shares that company insiders and officers hold are also part of the company's outstanding shares. The outstanding shares is not often stable, due to many factors, the number of outstanding shares fluctuates.

How to Locate the Number of Outstanding Shares

The outstanding shares of a company is an essential metric used in evaluating the cash flow per share, market capitalization and other finances of the company. It is important to know where the number of outstanding shares of a company are recorded, before they can be used in evaluating the finances of the company. The outstanding shares of a company are recorded or listed on the capital stock contained in the company's balance sheet. Oftentimes, publicly traded companies release information about their outstanding shares on their official website.

Stock Splits and Share Consolidation

A stock split increases the outstanding shares of a company, either through the issuance of additional shares or dividing a company's existing shares into multiple segments for the purpose of increasing liquidity. However, through a reverse stock split, the outstanding shares of a company can also reduce. In a reverse stock split, the shares of a corporate stock are merged to create more valuable shares, this mechanism is also referred to as a stock merge. A reverse stock split is otherwise called share consolidation in that the prices of shares of a company are reduced so that they can be more attractive and to meet the requirements of exchange listing.

Blue Chip Stocks

Typically, a blue chip stock or company is a company with an outstanding reputation. Blue chip stocks refer to the number of shares that a large company with huge market capitalization issues. A blue chip stock often experience an increase in the number of outstanding shares as a result of multiple share splits that the company has undergone over a sustained period of time. Also, due to the level of share splits, the company's market capitalization increases. Generally, the number of outstanding shares that a company has is crucial in the level of liquidity of the company. It is important to know that an increased number of outstanding shares is not an indicator of success in a company but makes the company attractive to investors.

Share Repurchase Programs

Share repurchase or buybacks decrease the number of outstanding shares of a company. In a repurchase program, a company buys back its own shares so as to increase the value of stock and thereafter improve the financial statements. During a repurchase, some of the outstanding shares of a company are taken off the market, leading to a reduction in the number of outstanding shares that the company has. Companies use the repurchase program to increase the market value of shares which will in turn positively affect the overall earnings per share. There are real life instances of companies carrying out a repurchase or buyback. Popular examples include the buyback down by Apple Inc in 2012 and a buyback by BlackBerry Ltd. in 2015.

Weighted Average of Outstanding Shares

The weighted average of outstanding shares is essential if the outstanding shares is considered for the calculation of earnings per share or market capitalization of the company. The number of shares realized after the outstanding shares have been adjusted for changes in the share capital over a period of time is the weighted average of outstanding shares. To calculate the weighted average of outstanding shares, the number of a company's outstanding shares will be multiplied by the reporting period that the shares covered. There are many financial calculations that come to play when the weighted average of outstanding shares is being calculated depending on the scenario.

Related Topics

• Corporate Governance Law (Intro)
• What is Business Governance?
• Berle-Means Thesis 
• Corporate Governance Rating Definition
• Who are the members of a corporation?
• Corporate Charter
• Shareholder Register
• Common Stock
• Preferred Stock
• Par Value
• Authorized Shares
• Issued Shares of Stock
• Unissued Shares of Stock
• Outstanding Shares
• Institutional Shares
• Dual Class Shares
• What is a closely-held corporation?
• Close Corporation Plan Definition
• What is a Private Company vs a Public Company?
• What is the role and purpose of the corporation?
• What is the Agency theory of corporate governance?
• Shareholder-Centric Perspective
• Shareholder Value
• What is the Stakeholder theory of corporate governance?
  
• What is the role & rights of Shareholders in the corporation?
  
• Shareholder Democracy Definition
• Quorum Definition
• Information Circular
• Straight and Cumulative Voting
• Statutory (Straight)
  
• Cumulative Voting
• Plurality Voting
• Class Voting Shareholders
• Changing the Voting Rules
• Supermajority (Voting)
• Shareholder Sponsored Proposal 
• What are the variations on attributes of Ownership structure?
• Stock Split
• What are the fiduciary duties owed by shareholders?
• When is a shareholder personally liable for corporate obligations?
• Appraisal Rights
• Dissenter's Rights
• Say on Pay Rights
• How can shareholder enforce their rights (direct and derivative actions)?
• Amotion
• What is the process for bringing a Derivative action?
• What are corporate vote Proxies?
• Proxy Statement
• Proxy Fight or Contest Definition & Explanation 
• What is Shareholder Activism and the significance of Institutional Investors?
• Activist Investor
• Overview of Board of Directors
• Board Decision Making
• Advisory Board (Observer Directors)
• What is the role of the Board of Directors?
• Board of Trustees
• Board of Governors
• What is the composition of the board of directors?
• Chairman of the Board
• CEO as Chairman of the Board
• Inside Director
  
• Outside Director
• Outside Director or Non-Executive Director Definition
• Independent Outside Director
• Budget Committee
• Audit Committee
• Compensation Committee
• Nomination Committee (Corporate Board)
• What standards govern the actions of the board of directors?
• Duty of Candor Definition
• Duty of Care (Board of Directors)
• Duty of Loyalty (Directors) 
• Self-Dealing
• Board Evaluation Definition
• What is the Business Judgment Rule?
• What is D&O insurance?
• Codetermination (Foreign)
• What is the role of Managers of the corporation?
• What standards govern manager actions?
• Chief Executive Officer (CEO)
• Chief Financial Officer
• Chief Information Officer (CIO)
• Chief Investment Officer (CIO)
• Chief Legal Officer
• Chief Operating Officer
• Chief Risk Officer
• Chief Security Officer
• Chief Technology Officer (CTO)
• What are the primary state and federal corporate governance laws?
• What is the role of the state in corporate governance?
• What is the role of Securities Laws in corporate governance?
• What is the role of the Foreign Corrupt Practices Act in corporate governance?
• What is the Sarbanes-Oxley Act (SOX) effect on corporate governance?
• Sarbanes-Oxley Act (SOX)
• What is the Dodd-Frank Wall Street Reform and Consumer Protection Act effect on corporate governance?
• Corporate Monitors
• What industry organization standards affect corporate governance?
• How do proxy advisory firms affect corporate governance?
• What is the role of ethics in corporate governance?
• What are the major causes of corporate governance issues?
• What are the access to information issues?
• What are decision-making structure issues?
• What are the power struggle or competition issues?
• Holding Company
• What are hostile takeovers and defenses to hostile takeovers?
• Williams Act
• Staggered Board
• Shark Repellent Defenses?
• Poison Pill Defenses?
• Flip Over Poison Pill Definition
• Flip In Poison Pill Definition
  
• Voting Poison Pill Plan
• Delay-Tactic Defenses?
• Legal Lockup Defenses?
• White Knight and Pac Man Defenses?
• Jonestown Defense
• Lady Macbeth Strategy
• Macaroni Defense
• Yellow Knight
• Back-end Plan Definition
• Backflip Takeover Definition
• Dead Hand Provision Definition
• Kamikaze Defense
• Operating Company Property Company Model
• Whitemail
• Scorched Earth Policy Definition
• Revlon Rule
• What are benefit-alignment issues?
• Cadbury Rules Definition