The Basics of Outstanding Shares and the Float

A publicly-traded company can directly influence how many shares it has outstanding. Another important announcement for shareholders is that Nvidia increased its quarterly dividend by 150%, from $0.04 to $0.10 per share, or $0.01 on a post-split basis. Even at the new, higher level, the yield will still be paltry, amounting to just four-tenths of 1%. Recent developments in the field of artificial intelligence (AI) have captured the public imagination over the past year or so. One of the byproducts of this trend has been the surging stock prices of companies at the forefront of this paradigm shift in technology.

• All of these metrics can be used with earnings per share numbers to give you a better overview of a company’s current position and future potential.
• If that event occurs on, say, December 15th of the year, it can distort the company’s apparent number of shares outstanding for the year.
• The image below shows a section of Apple’s (AAPL 0.01%) balance sheet from 2016 through 2020.
• They initially sell a set number of shares to investors, and then those same shares can be traded among investors on a secondary market.
• Afterward, if they need another cash injection, they may decide to issue more shares via a rights issue.
• Let us consider an example of a company named KLX Inc. in order to illustrate the computation of shares outstanding.

Where to find EPS data

In the case of Apple, this shows that the company had 15,552,752,000 shares of common stock “issued and outstanding” as of October 20th, 2023. The split itself doesn’t directly affect the company’s value but can indirectly influence investor perception and stock price. If the stock becomes more appealing and demand increases due to the lower price, the market capitalization could rise as a result of the stock split. Now, imagine you are one of the shareholders in XYZ that did not sell their shares as part of the buyback program. From your perspective, you now own a larger percentage of the company, since the total number of shares outstanding has declined.

Basic and Diluted Shares Outstanding

• A company’s number of issued shares includes any shares the company has bought back and now holds in its treasury.
• Authorized shares refer to the largest number of shares that a single corporation can issue.
• Let’s review the mechanics of a stock split and what it means for investors.
• They can’t tell you everything about the company and they shouldn’t be used on their own.
• The float, also called the free float or the public float, represents the subset of shares outstanding that are actually available to trade.
• The number of authorized shares per company is assessed at the company’s creation and can only be increased or decreased through a vote by the shareholders.

When this takes place, a company’s outstanding shares increase, and a higher degree of liquidity results. By contrast, a reverse stock split occurs when a company seeks to elevate its share price. Often, a company does this to meet listing requirements, which often require a minimum share price.

Shares Outstanding vs. Floating Stock: An Overview

If the net income remains at $1 million, the new EPS would be approximately $1.11 ($1 million / 900,000 shares). This represents an 11% increase in EPS, solely due to the reduction in the number of shares outstanding. Most notably, short interest usually is measured as a percentage of the float, rather than shares outstanding. This is because shares outstanding formula short sellers, when choosing to cover, can only buy the shares actually in the float. And so in theory (and often in practice), highly-shorted stocks with a low float present ripe conditions for a so-called “short squeeze”. Options and warrants are one aspect of the difference between basic shares outstanding and diluted shares outstanding.

How Outstanding Shares Work

At any given point, instruments like warrants and stock options must be accounted for as well. The number of shares outstanding increases whenever a company undertakes a stock split. Stock https://www.bookstime.com/bookkeeping-services/kansas-city splits are usually undertaken to bring the share price of a company within the buying range of retail investors; the increase in the number of outstanding shares also improves liquidity.

The figure for number of outstanding shares does not include any treasury stock. Companies with big news that affects their number of shares outstanding, such as stock splits, announce the events in press releases that are reported by the business media. Investors may choose to use weighted averages if they have compiled a position in a particular stock over a period.

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master’s in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology.

• The weighted average is used by accountants reporting a company’s financial results in accordance with GAAP (Generally Accepted Accounting Principals).
• Companies with options, convertible bonds, etc., disclose both basic as well as diluted EPS in their financial disclosures.
• This means you know what a stake in the company is worth and what you could expect to receive.
• It’s also worth saying that you shouldn’t rely on EPS calculations alone.
• For each share of Nvidia stock a shareholder owns — it’s currently trading for roughly $950 per share (as of this writing) — post-split, investors will hold 10 shares worth $95 each.

Next, 336,620,000 shares were held in the company’s treasury at that time, so subtracting this from the number of issued shares means that Johnson & Johnson had 2,783,223,000 outstanding shares at the end of 2014. Alternatively, the total number of shares outstanding can be easily calculated as a company’s market capitalization divided by the current share price. Before their availability on the secondary market, shares are authorized, issued, and, finally, purchased by investors who became equity owners or shareholders of the issuing company. Shareholders of common stock typically possess the right to participate in annual shareholders meetings and contribute toward the election of the company’s board of directors. Typically, a stock split occurs when a company is aiming to reduce the price of its shares.

How To Calculate Weighted Average Shares Outstanding

Treasury stock consists of shares that the company has acquired in a buyback. These shares are held in the corporation’s «treasury» rather than in circulation and are therefore excluded from the number of outstanding shares. First, the board of directors authorizes the company to issue a certain number of shares. The company hasn’t taken action yet; it’s just gotten approval to take action and sell some shares if it chooses to. As an example, let’s say that a fictional business, the Helpful Fool Company, has authorized 5,000 shares. XYZ then buys back 100,000 shares at $10 per share, spending $1 million of its cash reserves.