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What are outstanding shares in simple terms?
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In this article, I will break down the meaning of Outstanding Shares so you know all there is to know about it!
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What Are Outstanding Shares
Outstanding shares refer to all the stocks issued by a company to its shareholders.
In other words, if you consider all the shares issued to company investors, employees, directors, officers, and the general public, you’re considering a company’s shares outstanding.
Companies will typically report their total shares outstanding on their balance sheet.
For example, a company can have 20 million shares outstanding issued to all its shareholders.
The number of shares a company has outstanding varies over time.
The company can issue additional shares thereby increasing the total number of shares outstanding or it can buy back shares from other shareholders thereby reducing the total outstanding.
Fundamentally, a company’s outstanding shares refer to all the stocks held by all of the company’s shareholders.
Why Are Outstanding Shares Important
Knowing how many shares a company has outstanding in total is important for many reasons.
If you know how many shares a company has outstanding, you’ll be able to determine the company’s market capitalization.
The market capitalization is essentially the total value of the company (you take the price per share multiplied by the number of outstanding shares to get this figure).
Other important metrics that you can calculate using shares outstanding are the company’s earnings per share and cash flow per share.
The earnings per share allow you to calculate how much the company has generated in revenues on a per-share basis (this allows you to better compare companies in the same industry).
The cash flow per share is a metric allowing you to assess how much cash the company generates for every outstanding share.
Who Owns Oustanding Shares
The outstanding shares are held by all of the company’s stockholders including institutional investors, private investors, restricted stockholders, company insiders, and the general public.
When you tally up all of the shares issued by a company, you will get the total shares outstanding.
To determine the company’s outstanding shares, you do not exclude any shareholder or type of stock from your tally.
Anyone can own shares of a company, such as:
- Angel investors
- Private equity firms
- Institutional investors
- Company executives
- Company employees
- Company advisors
- Key personnel
- Public investors
How To Determine Number of Shares Outstanding
Companies will typically report the total number of shares outstanding on their balance sheet.
You will have a section called “outstanding shares” or “capital stock” where the company will indicate precisely how many shares were outstanding at a specific point in time.
In addition to reporting it on their balance sheet, public companies must also report their total number of shares outstanding to the stock exchanges.
In many cases, public companies have an “investor relations” section on their website where they provide the public with a copy of their financial statements and information about their shares outstanding.
In the United States, companies must also report their shares outstanding to the Securities And Exchange Commission whenever they file their quarterly reports.
How Shares Oustanding Fluctuate
A company’s capital stock is not static all the time, it fluctuates.
The number of shares a company has outstanding will change over time as the company issues or repurchases shares.
For example, a company may issue additional shares to raise the capital it needs to finance its business.
In this case, the total number of shares outstanding will increase.
On the other hand, a public company may want to reduce the total number of shares outstanding by buying back its own stock.
When the shares are bought back, the company’s total shares outstanding will diminish.
A company’s shares outstanding can also increase when a company declares a stock split or it can decrease in the case of a stock consolidation (or a reverse stock split).
What Are Outstanding Shares FAQ
What does “outstanding shares” mean?
Outstanding shares refer to all of the company’s issued shares of stock that are no longer held in its treasury.
The total number of outstanding shares allows you to calculate the corporation’s total market capitalization representing the company’s total market value.
What does it mean to have shares outstanding?
To have shares outstanding is to refer to all of the shares issued by a company to all its stockholders.
Outstanding shares include all restricted stock and non-restricted stock as well as all the shares held by institutional investors, hedge funds, mutual funds, pension funds, and others.
Where do you find a company’s outstanding shares?
To find a company’s outstanding shares, you should look at its balance sheet.
On the balance sheet, companies will report the total number of shares they have issued in their capital stock.
The more a company has shares outstanding, the more it has used equity securities to raise financing.
What affects a company’s total outstanding shares?
The total outstanding shares increase or decrease depending on if the company issued shares to stockholders or bought back shares.
For example, if a company issues stock to employees further to the exercise of stock options, the total shares outstanding will increase.
If the company buys back its shares through a share buyback program, then the total number of outstanding shares will decrease.
What type of shares are included in outstanding shares?
All types of shares are included in the outstanding shares including shares issued to company employees, managers, directors, officers, advisors, investors, institutional investors, accredited investors, restricted stocks, the public, and so on.
You add up all the shares owned by all the company’s stockholders to get the total outstanding shares.
So there you have it folks!
What are outstanding shares?
In a nutshell, the term “outstanding shares” refers to the total amount of shares that are owned by all of the company’s stockholders.
The shares outstanding include shares issued to accredited investors, private and public investors, company personnel and insiders, and anyone who has acquired shares of the company.
Knowing how many shares a company has outstanding is important for investors as they can calculate important financial metrics like earnings per share and cash flow per share.
Now that you know what are outstanding shares, who owns them, how to determine the number, and how it works, good luck with your research!
I hope you enjoyed this article on Outstanding Shares meaning! Be sure to check out more articles on my blog. Enjoy!
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