Outstanding Shares: Formula, Calculation, Types and Importance

By knowing their number, investors can gauge the company’s market capitalisation and better understand its position in the market. The number of shares outstanding is equal to the total number of issued stocks minus the number of stocks held in the company’s treasury. For example, you can calculate a company’s earnings per share (EPS), a common metric used to compare companies’ performances. You can find a company’s earnings per share by dividing the company’s profit by internal vs external financial reporting its outstanding shares of common stock.

Outstanding shares are the total number of common stocks owned by investors. Basic shares are the number of outstanding stocks currently outstanding, however, fully why is my tax refund delayed diluted shares outstanding tells you how many outstanding shares there could potentially be. On the other hand, outstanding shares refer to the total number of issued and owned shares of a company, excluding treasury shares.

While SO refer to company shares, including restricted and institutional, floating shares refer to those available for trading. Floating shares are calculated by subtracting outstanding and restricted ones. Restricted shares are held by company insiders, employees, and key shareholders that are subject to time restrictions and therefore cannot be traded. The primary difference between outstanding and float stock is that outstanding shares include all issued shares of a company’s stock, whereas float stock only comprises publicly traded shares. Investors often use float stock to assess a company’s liquidity and the ease its shares trade on the market.

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In these cases, it becomes necessary to carefully analyse the company’s financial statements and disclosures to accurately determine their number. Treasury shares, on the other hand, are shares that were once issued and have been repurchased by the company. These shares are no longer considered outstanding current and noncurrent liabilities on the balance sheet and do not have voting rights or receive dividends. The company can reissue or retire Treasury shares depending on its financial strategies. These shares represent ownership in the company and grant shareholders the right to vote on important company matters, such as board elections and major decisions.

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.
You must follow these five steps to determine the Outstanding Shares Weighted Average.
A company also often keeps a portion of its total outstanding shares of stock in its treasury from both initial stock issues and stock repurchase.
The shares issued by the company, excluding the ones kept in the company treasury, are called Outstanding Shares.
Treasury shares are the portion of shares that a company keeps in its own treasury.
For example, Berkshire Hathaway’s Class B shares are non-voting and offer lower voting rights than their Class A shares.

How to find the Total Number of Outstanding Shares of the Company?

For instance, a 2-for-1 stock split reduces the price of the stock by 50%, but also increases the number of shares outstanding by 2x. Furthermore, understanding them allows investors to evaluate a company’s dividend prospects. Dividends are typically paid out based on the number of outstanding shares, so knowing this figure can provide insights into the potential dividend yield. Investors seeking income from their investments can use this information to assess the attractiveness of a company’s dividend policy.

Example calculation

Diluted shares outstanding include “dilutive” securities that could add to the share count — including options, warrants, and convertible debt. The number of outstanding shares is calculated by subtracting treasury stock from the shares issued. Generally, you won’t need to calculate this number yourself and it will be listed for you on a company’s 10-Q or 10-K filing.

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The purpose of the repurchase can also be to eliminate the shareholder dilution that will occur from future ESOs or equity grants. While outstanding shares are a determinant of a stock’s liquidity, the latter is largely dependent on its share float. A company may have 100 million shares outstanding, but if 95 million of these shares are held by insiders and institutions, the float of only five million may constrain the stock’s liquidity. However, be aware of potential variations in calculating these shares based on company reports. Some companies may have complex capital structures, such as multiple classes of shares with different rights and restrictions.

The company’s board of directors normally controls the issuing and management of outstanding shares, subject to the appropriate securities authorities’ regulations and reporting obligations. The weighted average shares outstanding figure smooths out this variance, by simply averaging the share count across the reporting period. This is a figure calculated by the company itself; investors literally do not have the access to the data required. Typically, a stock split occurs when a company is aiming to reduce the price of its shares. When this takes place, a company’s outstanding shares increase, and a higher degree of liquidity results.

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. This 800 is divided into 600 (shares held by the public) + 200 (restricted shares held by company insiders). Essentially outstanding shares comprise all the shares owned by institutional investors, retail investors, and restricted shares held by insiders. The total SO can be easily calculated as the company’s market capitalization divided by the current share price.

For many companies, however, even those executing buybacks, the number of outstanding shares and the number of issued shares is the same. Those companies buy back and retire shares, instead of holding them in the treasury. In this way, the number of both issued and outstanding shares is reduced. Understanding how to calculate outstanding shares for a public company would appear to be a simple matter. Overall, the number of shares outstanding, the metrics you can calculate from it, and related metrics — like the float — provide key insights to investors. Moreover, the number of shares outstanding is extremely useful when monitoring how a company conducts its business, as things like stock splits also affect share numbers.

What is Basic Outstanding and Diluted shares?

Companies typically use reverse splits to increase their share price to meet minimum exchange listing requirements. Although this decreases liquidity due to fewer shares, it can deter short sellers by making it harder to borrow shares for short selling. When a company executes a stock split, the number of outstanding shares rises. Stock splits are often initiated to lower the share price, making it more accessible to retail investors and enhancing market liquidity.

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. Outstanding shares equation differ from issued (Authorized) as authorized shares are the number of shares a corporation is legally allowed to issue. In contrast, outstanding stocks are the ones already issued in the market. A company may announce a stock split to increase the affordability of its shares and grow the number of investors.

How To Calculate Weighted Average Shares Outstanding

This formula highlights the number of shares in the hands of external investors eligible for voting rights and dividends. You can find the number of shares outstanding by looking at the company’s balance sheet. 600 shares are issued as floating shares to the general public, 200 are issued as restricted shares to company insiders, and 200 are kept in the company’s treasury. In this case, the company has 800 outstanding shares and 200 treasury shares.

Let’s assume the company also has $500 million in convertible debt with a conversion price of $5. The reason for that is that most public companies have instruments that provide for shares to be issued in the future. These instruments include stock options, stock warrants, and convertible debt. Knowing a company’s number of shares outstanding is key when calculating critical financial metrics and determining share value as a portion of ownership.

Serving the world’s largest corporate clients and institutional investors, we support the entire investment cycle with market-leading research, analytics, execution and investor services. Investors can explore several avenues to determine the number of outstanding shares of a company. It is advisable to carefully go through the company’s financials before putting your money in!

And if these instruments are in the money, they represent current ownership of the company, even if technically the shares underlying the options, warrants or debt haven’t yet been issued.
The board of directors or shareholder vote may increase the number of authorized shares.
Let’s say that a company has authorized 10,000 shares of stock, and it has sold 8,000 of these shares to investors.
The market cap is calculated by multiplying the current market price per share by the total number of outstanding shares.
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.

Outstanding shares are the total number of shares issued by the company except the ones held in the company treasury. It includes all the shares held by public, institutional investors and company insiders and are used to determine the market capitalisation of the company. The formula for determining the outstanding shares is the number of shares outstanding x current share price. 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.

Companies typically issue shares when they raise capital through equity financing or when they exercise employee stock options (ESOs) or other financial instruments. Outstanding shares decrease if the company buys back its shares under a share repurchase program. Outstanding shares play a crucial role in determining a company’s market capitalisation.