What Are Issued Shares?
Issued shares are the subset of authorized shares that have been sold to and held by the shareholders of a company, regardless of whether they are insiders, institutional investors, or the general public (as shown in the company’s annual report). Issued shares include the stock a company sells publicly to generate capital and the stock given to insiders as part of their compensation packages.
Thus, authorized shares are the total amount a company can ever issue or sell, and issued shares are the portion of authorized shares that a company has sold or otherwise placed in the market, including shares they hold in their treasury.
Issued shares also differ from outstanding shares, or the number of shares that are in the market and available for purchase by investors but do not include shares the company holds in its treasury. Issued shares may be contrasted with unissued shares, which have been authorized for future offering but have not been issued yet.
- Issued shares refer to a company's total stock of equity shares held by investors, insiders, and held in reserve for employee compensation.
- Unlike outstanding shares, issued shares factor in treasury shares—stock a company buys back from shareholders.
- The number of shares issued must be first authorized and approved by a company's board of directors.
Understanding Issued Shares
A company issues a share only once; after that, investors may sell it to another investor on the secondary market. When companies buy back their own shares, the shares remain listed as issued, even though they become classified as "treasury shares" because the company may resell them. For a small, closely-held corporation, the original owners may hold all of the issued shares.
The number of issued shares is recorded on a company’s balance sheet as capital stock, or owners' equity, while shares outstanding (issued shares minus any shares in the treasury) are listed on the company’s quarterly filings with the Securities and Exchange Commission (SEC). The number of outstanding shares is also found in the capital section of a company’s annual report.
The number of issued and outstanding shares, which is used to calculate market capitalization and earnings per share (EPS), are often the same.
Authorized shares are those a company’s founders or board of directors (B of D) have approved in their corporate filing paperwork. Issued shares are those that the owners have decided to sell in exchange for cash, which may be less than the number of shares actually authorized.
Shares issued generate the assets or other value given for founding a company or growing it later on. For example, a company may retain authorized shares in order to conduct a secondary offering later, sometimes called a tender offering, or hold them for employee stock options (ESO).
Issued Shares and Ownership
Ownership of a corporation can be measured by identifying which investors were issued shares at a company’s startup or via a secondary offering. Ownership may also be measured by counting issued and outstanding shares, along with those that may become issued if all authorized stock options are exercised, which is known as the fully diluted calculation.
In addition, ownership may be measured by using issued and authorized stock as a forecast of the position shareholders may be in at a future date. This is called the working model calculation. All board members must use the same calculation when making decisions or plans for the business.
For example, if a startup company issues 10 million shares out of 20 million authorized shares to an owner, and the owner’s shares are the only ones issued, the owner has 100% of the corporation.
Boards typically use the fully diluted or working-model calculation for planning and projecting. For instance, if the board believes it may issue two million additional shares to an investor and offers three million shares as stock options to high-performing employees, it might offer the founders additional stock options so they do not significantly dilute their ownership percentage.