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What Are Outstanding Shares? Capital Stock Defined

Shares outstanding, or capital stock, refers to the total number of shares issued by a company except for those held in its treasury.
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Outstanding shares includes restricted shares held by insiders that are not immediately available for trading. 

What Does “Shares Outstanding” Mean?

In the world of finance, the phrase “shares outstanding” is used to refer to all of a company’s issued shares of stock that are not held in the company’s treasury. This includes shares held by the public as well as those held by institutional investors and company insiders. Outstanding shares are often referred to as “capital stock” on a company’s financial statements.

All outstanding shares are included in the calculation of certain important metrics like market capitalization (number of shares outstanding * current share price) and earnings per share (net income after dividend payments / shares outstanding).

How to Calculate Outstanding Shares

To calculate shares outstanding, a company would subtract the number of shares held in its treasury by the total number of shares it has issued.

Outstanding Shares Formula

Shares Outstanding = Issued Shares – Treasury Shares

TheStreet Dictionary Terms

Shares Outstanding vs. Float: What’s the Difference?

While capital stock includes all of a company’s issued shares, float only includes those available for public trading. In other words, the float comprises all shares that are not in some way locked up or restricted (e.g., held by institutional investors or insiders who are not yet allowed to trade). Float can be calculated by subtracting the number of restricted shares from the total number of shares outstanding.

Stock Float Formula

Stock Float = Shares Outstanding – Restricted Shares

Where Can You Find Out How Many Outstanding Shares a Company Has?

Companies report their shares outstanding to the Securities and Exchange Commission (SEC) four times per year in their quarterly filings, which are available on the Commission’s website. Outstanding shares are also listed on companies’ balance sheets, and many companies include this information on their websites as well.

How Do Splits, Reverse Splits, and Buybacks Affect Outstanding Shares?

Three events that can drastically alter the number of outstanding shares a company has are splits, reverse splits, and buybacks.

Splits

Sometimes, companies “split” their stock to increase the number of shares outstanding and lower the stock’s price. This can happen when a company’s shares have become expensive and they want to make them more affordable so that they are more appealing to retail traders that don’t have that much capital. A 2:1 stock split would double the number of shares outstanding and lower a stock’s price by half. Similarly, a 3:1 split would triple the number of shares outstanding and lower a stock’s price by two-thirds. In each case, the company’s total market value remains the same.

Reverse Splits

Alternatively, a company might conduct a reverse split in order to reduce the number of shares outstanding and increase stock price. Some stock exchanges (like the Nasdaq) require all stocks to trade above a certain price in order to remain listed, so a company whose stock has fallen below an exchange’s threshold might initiate a reverse split to boost stock price and remain listed. Reverse splits work like splits but in the opposite direction. A company reduces the total number of shares outstanding and increases stock price accordingly. As with splits, market cap remains the same.

Buybacks

Finally, a company could repurchase shares of its stock from the open market and then lock them up in the company treasury. This reduces the number of shares outstanding and often has a positive effect on share value due to the decreased supply. 

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