Subscribed share capital, which is what investors have expressed an interest in, is very different from issued share capital, which is the actual issued stock.
What Is Share Capital?
Share capital refers to the amount of funding a company raises through the sale of shares of stock to public investors. This means the company grants shareholders a small ownership stake in the company in exchange for monetary investment. Share capital constitutes the main source of equity financing and can be generated through the sale of common or preferred shares.
Common stock is what most people think of when they talk about the stock market. Common, or ordinary, shareholders have voting rights and participate in major company decisions. Though companies often pay dividends on common shares, they are not required to pay them.
Preferred shares, also called preference shares, do not entail the same kinds of ownership rights as common shares. However, they generally include a guaranteed dividend each year that must be paid before any dividends can be distributed to common shareholders. In short, though preferred shareholders have fewer rights, they do have a higher claim on company assets.
Though share capital refers to a dollar amount, it is dictated by the number and selling price of a company's shares. For example, if a company issues 1,000 shares for $25 per share, it generates $25,000 in share capital.
Share capital is only generated by the initial sale of shares by the company to investors. If the investor goes on to trade those shares to a third party, any profit made on the sale does not contribute to the issuing company's share capital.
Types of Share Capital
Share capital falls into one of several categories, depending on where the company is in the equity-raising process. They include:
Authorized Share Capital: The maximum amount of share capital a company is allowed to raise is called its authorized capital. Though this does not limit the number of shares a company may issue, it does put a ceiling on the total amount of money that can be raised by the sale of those shares.
Subscribed Share Capital: When a company prepares to "go public" by issuing stock for the first time, investors can submit an application expressing their desire to participate. Subscribed share capital refers to the monetary value of all the shares for which investors have expressed an interest.
Issued Share Capital: Issued share capital is simply the monetary value of the shares of stock a company actually offers for sale to investors. The number of issued shares generally corresponds to the amount of subscribed share capital, though neither amount can exceed the authorized amount.
Called-Up vs. Paid-Up Share Capital: Depending on the business and applicable regulations, companies may issue stock to investors with the understanding the investors will pay at a later date. Any funds due for shares issued but not fully paid for are called-up share capital. Any funds remitted for shares are considered paid-up capital.
Other Types of Capital
Other types of capital, such as debt financing or mezzanine financing, are not considered share capital. Debt capital includes financing sources such as lines of credit, business loans and credit card balances. While mezzanine financing, like share capital, is included under the equity section of the balance sheet, it is not considered share capital.