What is 'Unissued Stock'

Unissued stock is a class of company shares that have not yet been offered for sale on the market. They are typically not relevant to current stockholders in the sense that shares that have not been issued do not have voting rights or pay dividends. However, they are relevant in that they present the possibility for a dilution in the value of existing shareholders ownership (and share value) should the company choose to issue additional shares of stock in the future.

BREAKING DOWN 'Unissued Stock'

Uninsured shares might or might not be classified as treasury stock. Although not necessarily reflected on the balance sheets, most companies typically carry a large amount of unissued stock. That is because their corporate charters often allow for the issuance of a large number of stock shares to provide maximum flexibility in the event further stock sales are needed in the future. For example, a company might disclose in the notes complying its financial statements that it has authorization to issue 10,000,000 shares, but only a fraction that amount might be both issued and outstanding.

Unissued Stock and Treasury Shares

Treasury stock is stock that has already been issued and sold but has then been subsequently bought back by the company. Treasury shares are included under shareholder’s equity on a company’s balance sheet. However, some companies choose to classify repurchased shares as unissued stock. For example, a 2014 10K filed with the Securities and Exchange Commission (SEC) by Family Dollar Stores states: “Shares purchased under the share repurchase authorizations are generally held in treasury or are canceled and returned to the status of authorized but unissued shares.”

The number of unissued stock shares can be calculated by obtaining the total number of shares authorized for issuance and subtracting it from the total amount of shares outstanding, plus treasury stock shares.

Analysts and investors pay close attention to management’s plans for issuance of previously unissued stock for clues to potential events or developments such as reverse stock splits, options issuance, funding plans that call for issuance of shares, which could be dilutive to their earnings per share. Though they represent a potential source of ownership and earnings dilution for investors, unissued shares are not included in fully diluted earnings per share calculations. But earnings per share calculations do take into account the potential for convertible securities to be converted into equity as well as stock options granted but not yet exercised.

  1. Authorized Stock

    Authorized stock is the maximum number of shares that a corporation ...
  2. Fully Diluted Shares

    Fully diluted shares is the total number of shares that would ...
  3. Treasury Stock (Treasury Shares)

    Treasury stock is outstanding stock the issuing company buys ...
  4. Diluted Normalized Earnings Per ...

    Diluted Normalized Earnings Per Share measures a company's earnings ...
  5. Earnings Per Share - EPS

    Earnings per share (EPS) is the portion of a company's profit ...
  6. Diluted Earnings Per Share - Diluted ...

    Diluted EPS is a performance metric used to assess a company's ...
Related Articles
  1. Investing

    Assess Shareholder Wealth With EPS

    Find out if management is doing its job of creating profit for investors.
  2. Investing

    The Basics Of Outstanding Shares And The Float

    We go over different types of shares and what investors need to know about them.
  3. Investing

    How to pick winning penny stocks

    When choosing penny stocks, wise investors note several key factors that affect the way these stocks trade – and the inherent risks that can follow.
  4. Investing

    What Are Corporate Actions?

    Be a savvy investor - learn how corporate actions affect you as a shareholder.
  5. Personal Finance

    Understanding Your Employee Stock Options

    The real value of a stock option lies in the percentage the stock options represent in the company and how quickly they vest.
  6. Investing

    Why Do Companies Care About Their Stock Prices?

    A company's stock price reflects the company's earnings potential, its future viability, determines management compensation can play a critical role in mergers and acquisitions.
  7. Investing

    Introduction to Treasury Securities

    Purchasing Treasury securities backed by the U.S. government and knowing their characteristics can provide a steady guaranteed income and peace of mind.
  8. Investing

    Realty Income Falls After Diluting Shareholder Ownership

    The popular REIT saw its stock fall over 2 percent after announcing a secondary issuance worth over $7 billion.
  1. How Do Fully Diluted Shares Affect Earnings?

    Learn how fully diluted shares affect EPS calculations and perceived value. Read Answer >>
  2. What Is Treasury Stock?

    Find out about shares called treasury stocks that were once part of shares outstanding for a company, but have since been ... Read Answer >>
  3. Why would I need to know how many outstanding shares the shareholders have?

    Find out why shareholders should know how many outstanding shares have been issued by a corporation, and learn what happens ... Read Answer >>
  4. What is stock dilution?

    Stock dilution occurs when company actions reduce the ownership percentage of current shareholders. Find out how ownership ... Read Answer >>
  5. What is the difference between authorized shares and outstanding shares?

    Calculating financial ratios can help investors understand a company's financial position, but only when a knowledge of various ... Read Answer >>
  6. The share price and company's secondary offering

    When a company increases the number of shares issued through a secondary offering, it generally has a negative effect on ... Read Answer >>
Trading Center