Our writers and editors used an in-house natural language generation platform to assist with portions of this article, allowing them to focus on adding information that is uniquely helpful. The article was reviewed, fact-checked and edited by our editorial staff prior to publication.

Outstanding shares are all the shares issued and sold by a company that are not held by the company itself. Outstanding shares include a company’s common stock held by individual investors, institutional investors and restricted shares held by company officers and insiders. The category does not include treasury stock, which is the company’s own stock held by the company.

Here’s what you need to know about outstanding shares and how they’re vital to determining the value of a company.

Why are outstanding shares important?

Knowing the number of outstanding shares is important for determining a company’s market capitalization (market cap), which measures a company’s total value. Market cap is the total value of all the company’s outstanding stock, or the total number of outstanding shares times the current stock price. Investors use market cap to categorize companies into large-cap, mid-cap and small-cap companies, which can help guide investors looking to diversify their investments.

The number of outstanding shares is also important in calculating other financial metrics such as earnings per share. Keep in mind the number of outstanding shares can fluctuate. For instance, stock buybacks may increase the value of the remaining shares of stock and improve metrics such as earnings per share because there are fewer shares outstanding.

The amount of shares outstanding is important because it adds context to company earnings as well as your individual ownership stake. Owning 100 shares of a company with 1 million outstanding shares is a lot different from holding 100 shares in a company with 1 billion shares outstanding. — Greg McBride | Chief financial analyst at Bankrate

How to find outstanding shares

You can find outstanding shares in the company’s most recent annual report found on Form 10-K or on quarterly 10-Q filings. The filings will specify the number of outstanding shares on the company’s balance sheet, which is a document that lists a company’s assets, liabilities and shareholder equity. Public company financial filings are found on the SEC’s EDGAR website.

You can compare the differences between the figures on specific dates of the filings to find the change in outstanding shares. Companies may issue shares from time to time to fund growth or to reward executives and other insiders, so the number can vary from quarter to quarter. Similarly, companies may repurchase their own stock, reducing the outstanding share count.

As you look through a company’s financial documents, don’t confuse outstanding shares with issued shares, which is a slightly different category and includes treasury stock.

Outstanding shares vs. stock float

While a company has a certain number of outstanding shares, not all of those shares are available for trading, since they may be closely held by some (large) investors. The shares that are available for public trading are called the company’s stock float. While the number of outstanding shares and the public float may be the same, they don’t have to be, such as in the case of one company owning the shares of another company with no plans to sell them.

A company’s public float is often expressed as a figure or a percentage of the company’s total outstanding shares. For example, if a company has 10 million shares outstanding and its CEO holds 2 million of those, the company has 8 million floating shares, or 80 percent float.

How do stock splits affect outstanding shares?

In a stock split, a company exchanges its stock for more shares (in a forward split) or fewer shares (in a reverse split). The total number of shares in circulation increases or decreases according to the stock split’s exchange ratio. At the same time, the stock price is adjusted inversely to the exchange ratio, resulting in an increase or decrease. However, the overall market capitalization and value of the company remain unchanged.

The most commonly used stock split ratios are 2-for-1 and 3-for-1, meaning shareholders receive two or three additional shares for every share they already own. In a 2-for-1 split, for example, the number of outstanding shares doubles while the share price is cut in half.

In a 1-for-2 reverse split, however, the number of shares is divided by two, while the share price doubles. Reverse stock splits often happen when a company needs to keep its share price above a certain level in order to remain in compliance with an exchange’s listing requirements.

What about secondary stock offerings?

A company may issue more shares if it’s authorized to do so. A company might wish to issue more stock for a variety of reasons:

  • To generate capital to grow: A company may issue new shares to raise capital to grow the business, such as investing in a new factory or funding a new product.
  • To acquire another company or asset: A company may issue stock as a means to pay for another company or an asset such as a building or rental property, in the case of real estate investment trusts (REITs).
  • To have capital on hand: A company may want to have cash on hand for safety, and may issue shares when they offer a low-cost way to fund the business (i.e., the stock is expensive).

In short — issuing new shares of stock will raise the number of outstanding shares.

Bottom line

Outstanding shares are an important aspect of stock market trading as they have a direct impact on the company’s market capitalization and shareholder equity. The number of shares can fluctuate over time depending on the funding needs and growth trajectory of the company.