Issued vs Outstanding Shares: What’s the Difference

When analysing a company's capital structure, investors often encounter two related but distinct terms: issued shares and outstanding shares. Understanding the difference between them is critical for evaluating financial metrics such as earnings per share (EPS), market capitalisation, and shareholder equity.

Issued shares refer to the total number of shares that a company has formally created and allocated since its incorporation. These shares are part of the company’s authorised share capital and may be distributed to public investors, company insiders, or held as treasury stock after buybacks.

Issued shares include:

• Shares held by institutional or retail investors
  

• Shares allotted to promoters, employees, or directors
  

• Treasury shares repurchased but not cancelled

This figure represents the full count of shares a company has ever released—regardless of whether they are currently traded on the open market. While all outstanding shares are issued, not all issued shares are outstanding, especially if the company has repurchased shares and is holding them in treasury.

Issued shares can be categorised into different classes:

• Common stock – Typically carries voting rights and forms the bulk of publicly traded shares.
  

• Preferred stock – Offers fixed dividends, often without voting rights.
  

• Treasury stock – Shares that were issued and later repurchased by the company.
  

• Restricted shares – Often issued to insiders, subject to lock-in periods or performance conditions.
  

These categories reflect how shares are distributed and controlled within a company’s capital structure.

Outstanding shares refer to the total number of shares currently held by shareholders—excluding treasury stock.

This number is critical for calculating important financial ratios. It includes:

• Shares held by retail and institutional investors
  

• Shares held by company insiders
  

• Excludes repurchased shares held by the company itself

Outstanding shares are always equal to or less than the number of issued shares.

EPS is calculated using outstanding shares, not issued shares. This is because treasury shares are not considered when determining how much of the profit is attributed to shareholders.

EPS = Net Income ÷ Outstanding Shares

Example:

• Issued shares: 1,000,000
  

• Treasury shares: 100,000
  

• Outstanding shares: 900,000
  

• Net income: ₹9,000,000

EPS = ₹9,000,000 ÷ 900,000 = ₹10

If issued shares (instead of outstanding) were mistakenly used, EPS would appear lower, giving a misleading picture of profitability.

Issued and outstanding shares may seem similar, but they play very different roles in financial analysis. Issued shares reflect a company’s total authorised allocation, while outstanding shares represent the actual investor-held shares used to calculate EPS and market capitalisation. Understanding the distinction helps investors make more accurate evaluations of a company's valuation and performance.

This content is for informational purposes only and the same should not be construed as investment advice. Bajaj Finserv Direct Limited shall not be liable or responsible for any investment decision that you may take based on this content.