What are Outstanding Shares

Outstanding shares refer to the total number of a company’s shares that are currently held by all its shareholders, including institutional investors and company insiders. This figure is crucial for calculating ownership stakes, earnings per share (EPS), and market capitalisation, all of which are fundamental to evaluating a company's financial health and investment value.

Outstanding shares are the total number of shares currently owned by shareholders. This includes shares held by the public, institutional investors, and company insiders but excludes shares that have been repurchased and held as treasury stock.
It is important to distinguish between:

• Issued Shares: The total shares created by the company.
  

• Outstanding Shares: Issued shares minus treasury shares.
  

• Floating Shares: Shares available for trading by the general public, excluding closely held or restricted stock.
  

Understanding this hierarchy helps investors assess a company's share structure more accurately.

The standard formula to calculate outstanding shares is:

Outstanding Shares = Issued Shares – Treasury Shares

• Issued Shares: Total number of shares that the company has ever issued.
  

• Treasury Shares: Shares that have been bought back by the company and are not currently held by investors.
  

For example, if a company has issued 10 Crores shares and has 1 Crore in treasury, the outstanding shares would be 9 Crores.

Here is a simple step-by-step approach to calculate outstanding shares:

1. Identify total issued shares from company filings or financial statements.
   

2. Subtract treasury shares (shares the company holds in its own treasury).
   

3. The result is the total outstanding shares.
   

Example:
If a company has:

• Issued shares = 1,00,00,000
  

• Treasury shares = 10,00,000
  

Then,
Outstanding Shares = 1,00,00,000 – 10,00,000 = 90,00,000 shares

This calculation is essential when analysing per-share metrics like EPS or market capitalisation.

Outstanding shares are mainly of two types — basic outstanding shares and fully diluted outstanding shares. Basic outstanding shares refer to the actual number of shares currently issued and available for trading in the market. In contrast, fully diluted outstanding shares include not only the basic shares but also potential shares that could be created if all convertible securities like stock options, warrants, or convertible bonds were exercised.

Outstanding shares influence several critical financial and strategic metrics:

• Earnings Per Share (EPS): Calculated by dividing net profit by outstanding shares.
  

• Market Capitalisation: Share price multiplied by outstanding shares.
  

• Voting Rights: Defines the power held by shareholders in company decisions.
  

• Ownership Dilution: Additional issuance affects existing shareholders’ ownership.
  

Thus, understanding outstanding shares is crucial for equity investors and analysts.

Tracking a company’s outstanding shares over time helps investors:

• Assess changes in company ownership.
  

• Identify buybacks or dilution events.
  

• Understand long-term growth and capital allocation strategies.

A sudden increase or decrease may indicate corporate actions such as mergers, share splits, or equity fundraising rounds.

Outstanding shares may change over time due to:

• Stock Buybacks: Company repurchases its own shares, reducing the count.
  

• New Share Issuance: Raises capital by issuing additional shares.
  

• Stock Splits: Increases the number of shares by dividing existing ones.
  

• Reverse Stock Splits: Reduces the number of shares to boost per-share value.
  

• Employee Stock Options (ESOPs): May increase outstanding shares when exercised.

Each of these actions can impact investor ownership and share value perception.

Outstanding shares are a key metric in understanding a company’s capital structure and shareholder distribution. From influencing valuation metrics like EPS and market cap to affecting investor rights and share liquidity, they play a critical role in financial analysis. Keeping track of outstanding share changes over time provides meaningful insights into company actions and investor value.

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.