What is Shares Outstanding?

Shares outstanding refers to the number of shares a company has issued owned by its shareholders. It represents the ownership stake of a company and determines the distribution of its profits and losses. Knowing the number of shares outstanding, investors can evaluate a company's market value, financial performance and ownership structure. This article aims to answer the question: what is shares outstanding? Also, you’ll learn how to calculate shares outstanding, explore its significance and see how to find the data.

Understanding Shares Outstanding

Shares outstanding is the total number of shares a company has released to the public and its insiders, including employees, executives and founders. These shares are also referred to as issued shares or capital stock. To determine the number of shares outstanding, you subtract the amount of treasury shares from the authorized shares. Treasury shares are the ones the company has repurchased from the market and holds in its treasury, while authorized shares are the maximum number of shares a company can issue according to its articles of incorporation.

Significance of Shares Outstanding

Understanding the number of shares outstanding can provide insight into company performance and structure. Here are a few implications:

Market Capitalization

Market capitalization is the total value of a company's equity in the market, calculated by multiplying the current share price by the number of shares outstanding. Market capitalization is a helpful tool for comparing a company's size and growth potential to its competitors.

Earnings per Share (EPS)

EPS measures a company's profitability per share and is calculated by dividing the net income by the number of shares outstanding. This metric evaluates a company's earnings performance and growth prospects. A company with a high number of shares outstanding will have a lower EPS, which may negatively affect its attractiveness and stock price.

Dividends per Share (DPS)

DPS is the company's dividend payment to shareholders for each stock they own. It measures how much income a company shares with its investors and is used to evaluate its dividend policy and yield. DPS is calculated by dividing the total dividends paid by the number of shares outstanding — a lower outstanding share count results in a higher DPS and potentially a more appealing stock for investors.

Ownership Structure

The number of shares outstanding can also reveal a company's ownership structure, which can impact its decision-making and governance. Dispersed ownership is indicated by a large number of shares outstanding, meaning no single shareholder has a dominant stake. On the other hand, concentrated ownership is shown by a small number of shares outstanding, where one or a few shareholders have significant control.

Role of Shares Outstanding in Financial Analysis

Shares outstanding can help investors and analysts understand various aspects of a company's performance and value. 

• Understanding dilution and its effects: When a company issues new shares, it reduces existing stockholders’ ownership percentage and earnings power. This dilution can occur for different reasons, including raising capital, issuing stock options or warrants or conducting mergers and acquisitions. Investors can track changes in the number of shares outstanding over time to measure the degree and impact of dilution on a company's financial ratios and valuation metrics.
• Determining a company's ownership structure: Investors and analysts can gain valuable insights into a company's ownership structure by analyzing the distribution and concentration of shares outstanding among different types of shareholders. These may include institutional investors, retail investors, insiders or activists. Doing so can help identify potential sources of support or opposition for a company's strategy, as well as opportunities or risks for corporate actions such as proxy contests, takeover bids or buybacks.
• Analyzing market sentiment: Investors and analysts can determine the market sentiment towards a company's stock by comparing the number of shares outstanding with other indicators such as trading volume, short interest or float turnover. A high trading volume relative to the number of shares outstanding may suggest strong demand or interest in the stock. Conversely, a high short interest relative to the number of shares outstanding may indicate bearish expectations or negative sentiment towards the stock.

How to Find Information on Shares Outstanding

Finding accurate and up-to-date information on shares outstanding can be challenging, as different sources may report different numbers due to different methods or timeframes. However, investors and analysts can access the following resources for data. 

Company Reports and Filings

Companies are required to disclose the number of shares outstanding in their periodic reports and filings with regulatory authorities, such as annual reports (10-K), quarterly reports (10-Q) or current reports (8-K). You can access these reports and filings on the company's website or online databases such as EDGAR or SEDAR.

Stock Exchanges

You can check the stock exchange where the company's stock is listed for information about its shares outstanding. Most stock exchanges have this information available on their websites or platforms. For instance, on their websites, the New York Stock Exchange (NYSE) and the Nasdaq Exchange (NASDAQ) provide details about the number of shares outstanding for their listed companies.

Financial Websites and Databases

You can find information on shares outstanding from financial websites and databases that provide data and analysis on various companies and stocks. Platforms such as Yahoo Finance, Google Finance, Bloomberg and Morningstar gather and regularly update information on the number of shares outstanding for numerous companies from different sources and present it in a user-friendly format. 

Other Considerations for Shares Outstanding

Although outstanding shares are useful for investors and analysts, they should also consider other factors when evaluating a company's stock. 

Stock Split

A stock split is a process where a company divides each existing share into multiple new shares, increasing the number of outstanding shares. For instance, if there is a 5-for-1 stock split, each stockholder will receive five new shares for every share they own. This action does not affect the company's value or the shareholder's stake, but it lowers the share price and improves the stock's liquidity. A stock split may imply that a company is optimistic about its future growth and intends to make its stock more accessible and appealing to investors.

Reverse Stock Split

A reverse stock split entails a company combining multiple existing shares into a new one, decreasing the number of outstanding shares. For instance, a 1-for-2 reverse split implies that every shareholder will receive one new share for every two shares they presently own. However, this action does not affect the company's value or the shareholder's stake but may enhance the share price and decrease the stock's liquidity. A reverse stock split may suggest that a company is experiencing financial difficulties and seeks to prevent delisting or negative investor perception.

Blue Chip Stocks

Blue chip stocks refer to stocks of well-established, financially stable companies with a long history of consistent performance and dividend payments. These stocks usually have a high number of outstanding shares because the company has previously issued more shares to raise capital, reward shareholders or conduct mergers and acquisitions. Blue chip stocks are considered a safe and reliable investment option as they can offer steady returns and lower volatility than other stocks.

Outstanding vs. Issued vs. Floating Stock

Investors often confuse shares outstanding with other terms related to a company's share structure, such as issued shares or floating shares. However, each of these terms has a unique meaning and significance. 

Issued shares encompass all a company has created and distributed to its stockholders. These shares include both outstanding shares and treasury shares. Issued shares are the maximum number of shares a company can have at any given time unless it increases its authorized shares.

On the other hand, floating shares refer to the number of shares available for trading in the public market. These shares exclude the ones that are held by insiders, such as employees, executives, founders or affiliates, who have restricted access to sell their shares. Floating shares are crucial in determining the actual supply and demand of a company's stock in the market.

Shares Outstanding: A Window into a Company Financials

Shares outstanding is an important metric for investors and analysts who want to understand a company's market value, financial performance, ownership structure and market sentiment. By knowing how to calculate, interpret and find information on shares outstanding, market participants can make data-backed decisions about investing in or trading a company's stock.

Frequently Asked Questions