outstanding stock

(noun)

all the stock of a corporation or financial asset that have been authorized, issued and purchased by investors and are held by them

Related Terms

Examples of outstanding stock in the following topics:

  • Stock Dividends

    • The total number of shares outstanding increases in proportion to the change in the number of shares held by each shareholder.
    • If a 5% stock dividend is paid, the total number of shares outstanding increases by 5%, and each shareholder will receive 5 additional shares for each 100 held.
    • As the number of shares outstanding increases, the price per share drops because the market capitalization does not change.
    • A stock dividend could be paid from shares not-outstanding.
    • Stock dividends may also be paid from non-outstanding stock or from the stock of another company (e.g. its subsidiary).

  • Earnings per Share

    • Earnings per share (EPS) is the amount of a company's earnings per each outstanding share of a company's stock.
    • Earnings per share (EPS) is the amount of earnings per each outstanding share of a company's stock.
    • This is because preferred stock rights have precedence over common stock.
    • Diluted Earnings Per Share (diluted EPS) is a company's earnings per share (EPS) calculated using fully diluted outstanding shares (i.e. including the impact of stock option grants and convertible bonds).
    • Morningstar reports diluted EPS "Earnings/Share $" (net income minus preferred stock dividends divided by the weighted average of common stock shares outstanding over the past year).

  • Accounting for Preferred Stock

    • Preferred stock is a class of capital stock that carries certain features or rights not carried by common stock.
    • When noncumulative preferred stock is outstanding, a dividend omitted or not paid in any one year need not be paid in any future year.
    • For example, assume a company has cumulative, USD 10 par value, 10% preferred stock outstanding of USD 100,000, common stock outstanding of USD 100,000, and retained earnings of USD 30,000.
    • Convertible preferred stock is preferred stock that is convertible into common stock of the issuing corporation.
    • The par value, authorized shares, issued shares, and outstanding shares is disclosed for each type of stock.

  • Stock Splits

    • A stock split increases the number of shares outstanding without changing the market value of the firm.
    • A stock split or stock divide increases the number of shares in a public company.
    • Suppose a company has 1,000 shares outstanding.
    • They would split their stock 2-for-1.
    • They own the same percentage of the outstanding shares, though the nominal number of shares increases.

  • Accounting for Sale of Stock

    • How the stock sale is accounted for depends on the type of stock sold.
    • Most stock sales involve common stock or preferred stock.
    • There are several reasons a company may purchase treasury stock, it may need it for employee compensation plans, to buy another company or to reduce the number of outstanding shares.
    • Most stock sales involve common stock or preferred stock.
    • Summarize how to account for the sale of common stock, preferred stock and treasury stock

  • Repurchasing Shares

    • A share repurchase is when a company buys its own stock from public shareholders, thus reducing the number of shares outstanding.
    • The company then can either retire the shares, or hold them as treasury stock (non-circulating, but available for re-issuance).
    • Repurchasing shares will lead to a corresponding increase in price of the shares still outstanding.
    • The market capitalization of the company is unchanged, meaning that a reduction in the number of shares outstanding must be accompanied by an increase in stock price.
    • Open Market: The firm buys its stock on the open market from shareholders when the price is favorable.

  • Convertible Stock

    • This type of stock has an embedded option that allows it to be converted into a specified number of shares of common stock at a predetermined price; usually at a premium over the stock's market price.
    • Unlike common stock, preferred shares usually have no voting rights.
    • Preferred stock is reported in the stockholder's equity section as the number of shares outstanding, multiplied by the stock's market price.
    • The result is divided between the value of the shares that fall under "common stock - par value" and the excess value over par is reported as "common stock - additional paid-in-capital".
    • A public company's preferred stock is designated as convertible if it can be exchanged for common stock.

  • Calculating Diluted Earnings per Share

    • Stock warrants can be exercised for 1,000,000,000 common shares.
    • Diluted Earnings Per Share (diluted EPS) is a company's earnings per share (EPS) calculated using fully diluted common shares outstanding (i.e. which includes the impact of instruments such as stock option grants and convertible bonds).
    • The basic earnings per share formula involves taking the income available for common shareholders (net income minus preferred stock dividends), divided by the weighted average number of common shares outstanding.
    • Dilutive common shares from dilutive instruments, such as stock options or stock warrants, are added to the basic equation's denominator (weighted average number of shares outstanding), which decreases the ending result of earnings per share.
    • Diluted earnings per share includes shares of common stock from dilutive securities, such as convertible debt or stock options, in its calculation.

  • Reverse Splits

    • If Jim owns 10 shares of Oracle, and there are 1,000 shares outstanding, Jim effectively owns 1% of Oracle.
    • In order for Jim's ownership stake to remain constant, the number of shares he holds must change in proportion to change in outstanding shares: he must own 20 shares if there are 2,000 shares outstanding.
    • That is the premise behind a reverse stock split.
    • In a reverse stock split (also called a stock merge), the company issues a smaller number of new shares.
    • This leads to a corresponding rise in the stock price to $2.

  • Repurchasing Stock

    • Reasons can include: (1) to cancel and retire the stock; (2) to reissue the stock later at a higher price; (3) to reduce the number of shares outstanding and increase earnings per share (EPS); or (4) to issue the stock to employees.
    • For example, if the market fairly prices a company's shares at $50 a share, and the company buys back 100 shares for $5,000, it now has $5,000 less cash but there are also 100 fewer shares outstanding.
    • It can improve EPS due to the fewer number of shares outstanding as well as unchanged earnings.
    • Therefore, common stock is debited and treasury stock is credited.
    • The reacquired stock is referred to as treasury stock.