Outstanding shares are those ordinary shares that a company has issued, minus those that have been repurchased by it.
That is, they will be those shares that have been subscribed by investors and are not on the company's balance sheet as belonging to the company. These types of actions have specific characteristics that differentiate them and that we see below.
The shares in circulation are very important in the financial markets to do any stock market study. In fact, they are used to calculate the earnings per share of a company on the stock market or the market capitalization of the entity.
On the other hand, the outstanding shares of a company vary over time. They can be both increased and decreased.
Shares outstanding in practice
As mentioned, over time the shares in circulation may increase or decrease. On the side of the reasons why they can be increased, we have the following:
- Issuance by the company of new additional shares.
- Share split. Here the company performs a stock split. So the number of shares in circulation increases, reducing the price proportionally.
On the side of the reasons why outstanding shares can be reduced, we have the following:
- Share buyback program. The company has the option of repurchasing shares, logically reducing those that are in circulation.
- Contrasplit of action. It is just the opposite of the Split previously mentioned. In this case, the company reduces the number of shares in circulation by increasing the price proportionally.
Where to find information about circulating shares
It should be noted that any company that is listed on the financial markets has the obligation to report these actions.Every company will publish in its financial statements, both the issued and outstanding shares. So this type of information is accessible to all the public.
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