Why might the number of shares issued be more than the number of shares outstanding?
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#issued shares = #outstanding shares + #treasury shares.So the number of issued shares must be greater than treasury shares by definition. However, Starbucks' fiscal 2014 From 10-K reports "Common stock ($0.001 par value) — authorized, 1,200.0 shares; issued and outstanding, 749.5 and 753.2 shares, respectively," which clearly contradicts with the concept. What is happening here? The same thing, number of outstanding shares is greater than issued, shows up in a number of other company's balance sheet, such as Apple, Google, etc. What are Authorized Shares?Authorized shares are the number of shares that a corporation is legally allowed to issue. The number of authorized shares is initially set in a company's articles of incorporation. The shareholders can increase the number of authorized shares at any time at a shareholders meeting, as long as a majority of shareholders vote in favor of the change. What are Outstanding Shares?Outstanding shares have already been issued. Several activities can increase the number of outstanding shares. For example, shares may be issued via a private placement, an initial public offering, a secondary offering, as a stock payment, or when someone exercises a warrant or option. The number of outstanding shares declines when a company buys back shares (which are then known as treasury stock). Comparing Authorized and Outstanding SharesThe number of outstanding shares is always equal to or less than the number of authorized shares. The number of authorized shares may be kept substantially higher than the number of outstanding shares, so that an organization has the flexibility to sell more shares at any time, depending on its financing needs.
Guide to Understanding Shares Outstanding Concept Shares Outstanding represent all of the units of ownership issued by a company, excluding any shares repurchased by the issuer (i.e. treasury stock). Table of Contents
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. However, typically there are multiple different share types with varying:
In the US, public companies are obligated to report their number of shares outstanding as part of the SEC’s filing requirements. The number of shares outstanding of a company can be found in its quarterly or annual filings (10-Qs or 10-Ks). However, due to the fluctuations in share counts between reporting periods, the figure is typically expressed as a weighted average. The formula for calculating the shares outstanding consists of subtracting the shares repurchased from the total shares issued to date. Shares Outstanding Formula Issuances of shares can come in several forms, such as:
Shares outstanding are the basis of several key financial metrics and can be useful for tracking a company’s operating performance. Two different ways to analyze a company through its shares outstanding are earnings per share (EPS) and cash flow per share (CFPS).
Shares Outstanding in ValuationShares outstanding are used to determine a company’s market capitalization, i.e. the total value of a company’s equity, or equity value. Market capitalization is calculated by multiplying the company’s share price by its shares outstanding. Market Capitalization Formula 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. Another metric calculated using shares outstanding is the price-to-book (P/B) ratio. P/B is often used to value companies in the financial sector (i.e. banks) and is calculated by taking a company’s share price and dividing it by the book value per share. Since the book value per share is found by taking the company’s book value of equity (i.e. its assets minus its liabilities), shares outstanding influence a company’s book value and appear in the ratio’s denominator. A publicly-traded company can directly influence how many shares it has outstanding. The company can increase or decrease the number of shares outstanding by issuing new shares or via share repurchases (buybacks).
Stock Splits and Reverse Stock SplitsStock splits and reverse stock splits are other methods for companies to alter their shares outstanding, since rather than creating new shares or buying back existing ones, these actions affect shares that are already on the market without any change in economic value.
Step-by-Step Online Course Everything You Need To Master Financial ModelingEnroll in The Premium Package: Learn Financial Statement Modeling, DCF, M&A, LBO and Comps. The same training program used at top investment banks. Enroll Today Can issued shares be more than outstanding?With a large number of companies, their number of issued shares and outstanding shares will be the same. The number of outstanding shares, however, can never be more than the number of issued shares.
What is the difference between issued shares and outstanding shares?A company's number of shares outstanding is the number of shares investors and company executives currently own, while the number of issued shares is the number of shares that have ever been traded in the stock market.
Why are companies allowed to issue more shares?A corporation will most likely decide to issue additional shares of stock in order to raise additional capital. The benefit of raising additional capital is obvious—more capital for the corporation allows the company to grow.
What does it mean when a company has a lot of outstanding shares?Shares outstanding refer to a company's stock currently held by all its shareholders. These include share blocks held by institutional investors and restricted shares owned by the company's officers and insiders. A company's number of shares outstanding is not static and may fluctuate wildly over time.
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