Shares Outstanding
IntermediateShares outstanding is the total number of a company's shares currently held by all its shareholders, including insiders and institutions, but excluding shares the company has bought back and holds itself.
Shares outstanding is a basic figure used in many calculations. Market capitalization is the share price multiplied by shares outstanding. Earnings per share is net income divided by the average number of shares outstanding.
The number changes over time. It rises when a company issues new shares, for example to raise money, pay for an acquisition or reward employees with share awards. It falls when a company buys back its own shares. Shares bought back are often held as treasury shares, which do not count as outstanding, receive no dividends and carry no votes.
For example, a company with 200 million shares outstanding that buys back 10 million will have 190 million shares outstanding. If its net income stays at 380 million, earnings per share rises from 1.90 to 2.00.
Analysts also look at fully diluted shares outstanding, which includes shares that could be created from stock options, convertible bonds and similar instruments. This gives a more cautious view of how many shares might eventually share in the company's profits.
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