Weighted Average Shares vs Outstanding Shares

In general, stocks with low floats will experience more volatility than those with large floats. Shares outstanding is a financial number that represents all the shares of a company’s stock that shareholders, including investors and employees, currently own. A higher number of outstanding stocks means a more stable company given greater price stability as it takes many more shares traded to create a significant movement in the stock price. Contrary to this, the stock with a much lower number of outstanding stocks could be more vulnerable to price manipulation, requiring much fewer shares to be traded up or down to move the stock price.

Why are Outstanding Shares Important?

To understand the differences between outstanding shares and float, we first need to understand the types of shares. 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. Investors may choose to use weighted averages if they have compiled a position in a particular stock over a period.

Can the number of outstanding shares change?

Most of the time, corporations will tell investors how many shares of stock they’ve issued, but sometimes, it’s helpful to be able to calculate those numbers on your own. Below, you’ll find some tips on a couple of different calculation methods to determine the number of shares of stock a company has. The number of outstanding shares changes periodically as the company issues new shares or repurchases existing shares, splits its stock or reverse-splits it. To understand this more deeply, let’s consider the case of a hypothetical company called XYZ that decides to initiate a share what are retained earnings repurchase program.

• Company A has issued 25,800 shares, offered 2,000 shares to two partners, and retained 5,500 stocks in the treasury.
• It is essential to note that outstanding shares can fluctuate due to events such as stock buybacks or secondary offerings.
• This number represents all the shares that can be bought and sold by the public, as well as all the restricted shares that require special permission before being transacted.
• Market capitalization is calculated by multiplying the company’s share price by its shares outstanding.

How a change in shares outstanding can affect crucial financial ratios

At the start of the year, XYZ has 1 million shares outstanding and a share price of $10, giving it a market capitalization of $10 million. A company’s number of shares outstanding is used to calculate many widely used financial metrics. Market capitalization — share price times number of shares outstanding — and EPS are both computed using a company’s number of outstanding shares. As a real-world example, here is some information from Johnson & Johnson’s (JNJ -1.34%) 2014 year-end balance sheet.

• “Shares outstanding” also is a line in the data that is displayed with any stock quote.
• While the lower number of outstanding shares often hampers liquidity, it could also deter short sellers since it becomes more difficult to borrow shares for short sales.
• A company’s outstanding shares may change over time because of several reasons.
• But the concept of outstanding shares is a bit more complicated than it seems.

Typically, a stock split occurs when a company is aiming to reduce the price of its shares. When this takes place, total shares outstanding formula 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.

And when shares are bought back, investors end up owning more of the company. An additional metric used alongside shares outstanding is a company’s “float,” which refers to the shares available for investors to buy and sell on the open market. Basic shares mean the number of outstanding stocks currently outstanding, while the fully diluted number considers things such as warrants, capital notes, and convertible stock.