How to Calculate the Number of Shares of Common Stock Outstanding The Motley Fool

A company’s number of outstanding shares is not static and may fluctuate wildly over time. Conversely, a reverse stock split reduces the number of outstanding 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. A company’s outstanding shares, the total shares held by shareholders excluding treasury stock, can fluctuate due to various factors. Notably, stock splits and reverse stock splits significantly influence the number of outstanding shares.

Outstanding shares represent a company’s shares that are held by investors, whether they’re individual, institutional, or insiders. Investors can find the total number of outstanding shares a company has on its balance sheet. Outstanding shares can also be used to calculate some key financial metrics, including a company’s market cap and its earnings per share. They are separate from treasury shares, which are held by the company itself.

What is the difference between authorized shares and outstanding shares?

1. Stock might be sold to raise capital; convertible debt might move into, or out of, the money.
2. The number of authorized shares can be substantially greater than the number of shares outstanding since authorized shares represent the maximum possible number of shares a company can issue.
3. As a real-world example, here is some information from Johnson & Johnson’s 2014 year-end balance sheet.
4. Shares that a company buys back from the open market, reducing the total number of outstanding shares.
5. A recent example of a reverse stock split is General Electric’s (GE) 1-for-8 reverse stock split during the summer of 2021.

In particular, the common stock line of the balance sheet will typically oecd income tax wedge chart have a number that equals the par value of each share multiplied by the number of shares issued. Therefore, if you have the balance sheet entry and the par value, you can calculate the issued share count. In some cases, there will be a separate line item on the balance sheet for treasury stock, and a similar calculation can tell you the number of shares issued but not outstanding. Outstanding shares impact a company’s market capitalization, which is calculated by multiplying the stock price by the number of outstanding shares. Changes in the number of outstanding shares can affect the stock price by altering supply and demand dynamics.

What Happens if Outstanding Shares Increase?

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How to Find Number of Shares Outstanding

The number of authorized shares can be substantially greater than the number of shares outstanding since authorized shares represent the maximum possible number of shares a company can issue. The outstanding number of shares may be either equal to or less than the number of authorized shares. For example, a company might authorize 10 million shares to be created for its IPO, but end up actually only issuing nine million of the shares. Knowing a company’s number of shares outstanding is key when calculating critical financial metrics and determining share value as a portion of ownership. While outstanding shares are a determinant of a stock’s liquidity, the latter is largely dependent on its share float.

The number of shares of common stock outstanding is a metric that tells us how many shares of a company are currently owned by investors. This can often be found in a company’s financial statements, but is not always readily available – rather, you may see terms like „issued shares” and „treasury shares” instead. Besides, it can be helpful to understand where the numbers you’re looking at came from. Shares outstanding are the stock that is held by a company’s shareholders on the open market. Along with individual shareholders, this includes restricted shares that are held by a company’s officers and institutional investors. For blue chip stocks, multiple stock splits over decades contribute to market capitalization growth and investor portfolio expansion.

As noted above, outstanding shares are used to determine very important financial metrics for public companies. These include a company’s market capitalization, such as market capitalization, earnings per share (EPS), and cash flow per share (CFPS). The profit and loss statements in nearly every corporate earnings press release will include both basic and diluted shares outstanding. 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.

Outstanding Shares and Market Capitalization

Several factors can cause a company’s number of outstanding shares to rise or fall, with one of the most common being stock splits. Here, the balance sheet reports 8,019 million shares issued and 3,901 million treasury shares, as of September 30, 2022. Floating stock is a narrower way of analyzing a company’s stock by shares.

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. For example, the price-to-earnings (P/E) ratio calculates how much investors are paying for $1 of a company’s earnings by dividing the company’s share price by its EPS. The formula for calculating the shares outstanding consists of subtracting the shares repurchased from the total shares issued to date. However, due to the fluctuations in share counts between reporting periods, the figure is typically expressed as a weighted average. The term shares outstanding is defined as the total number of shares a company has issued to date, after subtracting the number of shares repurchased. These factors directly impact outstanding shares, influencing investment decisions.

It also has 10 million stock options outstanding with an exercise price of $5. For most companies, the number of authorized shares well exceeds the shares outstanding. In addition, most public companies don’t need to issue more shares, at least in the number required to bump up against the authorized maximum. The number of shares outstanding can be computed as either basic or fully diluted.

However, just because a corporation is authorized to issue stock doesn’t mean that it has to issue all of those shares. Most of the time, corporations will tell investors how many shares of stock they’ve issued, but sometimes, it’s helpful to be able to calculate those numbers on your own. Below, you’ll find some tips on a couple of different calculation methods to determine the number of shares of stock a company has.

One key goal of the diluted share figure is to appropriately calculate earnings per share accounting for all of the potential shares out there, whether currently existing or underlying other instruments. Convertible debt is treated on an “as-converted” basis if the company’s stock is trading above the conversion price. In other words, the treasury stock method accounts for the cash that will come in from option and warrant exercise, and assumes that the cash received will offset a portion of the shares issued. Here’s what you need to know about the different share counts that publicly traded companies use, as well as how you can calculate the number of outstanding common shares.

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. In the above example, if the reporting periods were each half of a year, the resulting weighted average of outstanding shares would be equal to 150,000. 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. Of course, merely increasing the number of outstanding shares is no guarantee of success; the company has to deliver consistent earnings growth as well. Corporations have a certain number of authorized shares of common or preferred stock.

A company’s outstanding shares may change over time because of several reasons. These include changes that take place because of stock splits and reverse stock splits. There are also considerations to a company’s outstanding shares if they’re blue chips. How to calculate outstanding shares Of these terms, the two that you need in order to determine the number of outstanding shares are issued shares, and treasury shares. Generally, both of these figures can be found on a company’s balance sheet.