What are Outstanding Shares? Definition and Example

What are outstanding shares?

Outstanding shares are all the shares of a company currently held by all its shareholders and available to investors. Shareholders include institutional investors and the company's officers and insiders. In other words, outstanding shares comprise shares that have been authorized, and issued, and are now in investors’ possession.

It's worth noticing that outstanding shares exclude the stock in the treasury that the company has repurchased. You can check the number of outstanding shares in the company's balance sheet under shareholders' equity. It may change over time because the company issues new shares and buys back the existing stocks.

Outstanding shares vs. Authorized shares

Authorized shares refer to the maximum number of shares a company can issue. The number of authorized shares exceeds the number of outstanding stocks. First, a company gets the regulator’s permission to issue a certain number of shares, for example, 1 000 000. That would be authorized stock. The actual number of issued shares can be just 500 000. These shares would be outstanding. In the future, when this company needs additional capital, it may sell 500 000 more shares. This time, it won't need to file an application to the regulator. Thus, a company will have the flexibility to fulfill its financing needs.

Outstanding shares example

Let's check Tesla Inc.'s balance sheet for September 30, 2021. The document says that the company had 2 000 000 common shares authorized and 1 004 000 shares issued and outstanding. As the net income equaled $1 618 000, the net income per common share was $1.62.

Traders need the information about a company’s outstanding shares to learn more about stocks and forecast their future prices. Open an account to trade stocks with FBS!

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2023-05-08 • Updated

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