Outstanding Shares (Capital Stock)
Definition of 'Outstanding Shares (Capital Stock)'
Outstanding shares, or “capital stock” on a balance sheet and sometimes referred to as “shares outstanding,” are defined by the total number of shares held by or sold to a company’s shareholders in the open market. Outstanding shares include common stock, share blocks held by institutional investors, and restricted shares owned by company officers. Notably, treasury stock is not included under this umbrella.
TheStreet Explains ‘Outstanding Shares (Capital Stock)’
Outstanding shares represent a critical number for companies because it is used by analysts and investors to assess a company’s market capitalization, cash flow per share, and earnings per share. It’s also a critical number for reporting purposes; companies are obligated to declare it to the U.S. Securities and Exchange Commission on a quarterly basis and post it for investors in pertinent review materials such as investor relations publications.
The number of outstanding shares is not a fixed quantity, either. Companies may elect to issue additional shares if they need to raise capital or exercise employee stock options. Companies may also elect to repurchase shares from the open market (effectively reducing the number of outstanding shares)—particularly if its managers believe their shares to be undervalued (or selling for a price per share that they believe to be below the share’s true value). Increases and decreases in the number of outstanding shares are also the product of stock splits and share consolidation, respectively. ACME, Inc., can double the number of shares available in order to make them more accessible to investors by undertaking what’s known as a 2-for-1 stock split—or the division of individual shares into two shares, both of which retain the same share price as the original share. However, if ACME, Inc., wants to reduce the number of shares available to investors (and proportionally increase the per-share price), it will engineer what’s called a “reverse split,” effectively consolidating a group of two or more shares into one share.
Terms Related to 'Outstanding Shares (Capital Stock)':
Securities, or shares, representing ownership of a company. Owners ...
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