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Outstanding Shares: Explained

Updated: Jun. 21, 2022Written By: Michelle JonesReviewed By:

Outstanding shares reflect the total share count of a company's stock. Investors can find a company's number of outstanding shares reported on its financial statements.

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What Are Outstanding Shares?

Outstanding shares include all of a company's shares held by shareholders as well as all the restricted shares owned by company insiders. However, the outstanding share count excludes treasury shares held by the company itself.

As already stated, investors can find the number of outstanding shares on the investor relations section of the company's website or on its balance sheet within the "Capital Stock" or "Shareholders' Equity" section. The stock exchange the company trades on will also report the number of outstanding shares.

Companies and investors use the number of outstanding shares to calculate important metrics like market capitalization and earnings per share (EPS).

How Outstanding Shares Work

Outstanding shares consist of every share owned by institutional investors and retail investors and restricted shares held by insiders. A company's "float" is a different measure that only considers the number of shares available for trading on the public market.

Important: To calculate the earnings per share, investors subtract any preferred dividends from a company's net income, and then divide that amount by the number of outstanding shares. To calculate market cap, investors multiply the company's current per-share price by the number of outstanding shares.

How Outstanding Shares are Calculated

To calculate the number of outstanding shares, investors take the total number of issued shares and subtract the number of treasury shares held by the company as well as the number of restricted shares.

Outstanding Shares = Total Issued Shares - (Treasury Shares + Restricted Shares)

Restricted shares are those issued to an insider that vest over time if that individual maintains their position with the company.

Why Outstanding Shares Change

The number of outstanding shares isn't static and, for many companies, the count can change frequently. Several factors cause the number of outstanding shares to increase, including:

  • Employee share grant programs
  • New share issues
  • Stock splits can increase the number

On the other hand, share buybacks or reverse stock splits would decrease the outstanding share count.

Fully Diluted Share Count

Some companies issue bonds or warrants that can be converted into shares, and many offer stock options to their employees as part of their compensation. These instruments are called convertible securities. These securities do not count towards the number of outstanding shares until the point where they are converted into common shares.

Many stock analysts prefer to use an adjusted measure of outstanding shares that includes the number of potential new common shares that could result from convertible securities. This measure is referred to as the fully diluted share count. The diluted share count considers all the shares that would be available if all the possible conversions took place.

If a company has no warrants, convertible bonds, or directly issued stock options, the fully diluted share count will be the same as the outstanding share count. On the other hand, if a company does have convertible securities outstanding, the fully diluted share count will exceed the outstanding share count.

Outstanding Shares vs. Float

While outstanding shares are those held by shareholders and insiders, the float is the number of shares that are available for trading. The float excludes certain shares held by insiders and some institutional investors with a controlling stake in the company; these closely-held shares are not traded publicly on exchanges, and the insiders rarely sell them, so they are not counted as part of the float.

Important: Some investors compare the size of the float to the number of outstanding shares to figure out how tightly controlled the company is. A company with a low float compared to the number of outstanding shares is under a firmer grip by insiders or institutional investors with a controlling stake.

Bottom Line

Outstanding shares include the total count of shares of a company held by shareholders and insiders. The number of outstanding shares is an important part of many calculations, including a company's market capitalization and earnings per share. The float reflects only the number of shares that are available for trading.

This article was written by

Michelle Jones profile picture
Michelle Jones is editor-in-chief for ValueWalk.com and a daily contributor for ValueWalkPremium.com and has been with the sites since 2012. Previously, she was a television news producer for eight years. She produced the morning news programs for the NBC affiliates in Evansville, Indiana and Huntsville, Alabama and spent a short time at the CBS affiliate in Huntsville. She lives in the Chicago area with her son, dog and two cats.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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