What Is Unissued Stock?

Unissued stock is a class of company shares that are not circulating or up for sale by the company either to employees or to the general public. As such, companies do not print the stock certificates for any unissued shares. The total number of unissued shares is normally held in a company's treasury. The number of unissued shares typically have no bearing on shareholders.

Key Takeaways

  • Unissued stock is a class of company shares that are not circulating or up for sale by the company on the market.
  • The number of unissued shares can be calculated by subtracting the total number of authorized shares from outstanding shares plus treasury stock shares.
  • Unissued shares may be irrelevant to current stockholders because they do not qualify to have voting rights or to pay dividends.
  • Unissued stock may indicate the potential for events or developments that may dilute a company's earnings per share.

Understanding Unissued Stock

When a company goes public, it authorizes a certain number of shares to be created in its charter or its articles of incorporation. These shares are referred to as authorized stock. Authorized stock is comprised of all stock that is created including shares up for sale to investors and/or employees, as well as any shares that are not up for sale. The former is called outstanding stock, while the latter is referred to as unissued shares. Unlike they do for outstanding shares, companies do not print up certificates for unissued stock, which are held in the company's treasury.

The number of unissued 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. Treasury stock is the amount of shares repurchased by a company.

Unissued shares are not relevant to current stockholders in the sense that shares that they do not qualify to have voting rights or to pay dividends. But this can change, as they may 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.

Unissued stock may dilute existing shareholder value if a company decides to authorize more stock in the future.

Analysts and investors pay close attention to company 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 (EPS). 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.

Unissued Stock vs. Treasury Shares

Unissued stock is generally not the same as treasury stock. Treasury stock represents any shares that have already been issued and sold, but have subsequently been repurchased by the company. But the lines between the two may be slightly blurred, as some companies may choose to list these shares as unissued stock.

Companies who choose to list treasury shares as unissued stock have corporate charters that 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. A company may 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.

Let's look at a real 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.”