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.

RELATED TERMS
  1. Issued Shares

    Issued shares are the number of authorized shares sold to and ...
  2. Diluted Normalized Earnings Per ...

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

    Earnings per share (EPS) is the portion of a company's profit ...
  4. Treasury Stock Method

    The treasury stock method is an approach companies use to compute ...
  5. Outstanding Shares

    Outstanding shares refer to a company's stock currently held ...
  6. Subsequent Offering

    A subsequent offering is the issuance of additional shares of ...
Related Articles
  1. Investing

    The Dangers of Share Dilution

    Investors need to be aware of dilutive securities and how they can affect existing shareholders.
  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

    Investment Valuation Ratios

    Learn about per share data, price/book value ratio, price/cash flow ratio, price/earnings ratio, price/sales ratio, dividend yield and the enterprise multiple.
  4. Investing

    What Are Corporate Actions?

    Be a savvy investor - learn how corporate actions affect you as a shareholder.
  5. 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.
  6. Investing

    A Breakdown Of Stock Buybacks

    Find out what these company programs achieve and what it means for stockholders.
  7. Financial Advisor

    Advising FAs: How To Explaining Stocks to a Client

    Without a doubt, common stocks are one of the greatest tools ever invented for building wealth.
RELATED FAQS
  1. Why is an increase in capital stock on a company's balance sheet a bad sign for stockholders?

    Understand what capital stock represents for a company and understand the significance for investors when a company initiates ... 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. What's the difference between a capital stock and a treasury stock?

    Learn about treasury capital stock, how to calculate a company's capital and treasury stock, and the differences between ... Read Answer >>
  4. 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 >>
  5. What Does the Diluted Share Price Reveal?

    Learn how diluted share price affects earnings and the company's overall financial performance. Read Answer >>
  6. What is stock dilution?

    Stock dilution occurs when company actions reduce the ownership percentage of current shareholders. Read Answer >>
Hot Definitions
  1. Current Assets

    Current assets is a balance sheet account that represents the value of all assets that can reasonably expected to be converted ...
  2. Volatility

    Volatility measures how much the price of a security, derivative, or index fluctuates.
  3. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  4. Cost of Debt

    Cost of debt is the effective rate that a company pays on its current debt as part of its capital structure.
  5. Depreciation

    Depreciation is an accounting method of allocating the cost of a tangible asset over its useful life and is used to account ...
  6. Ratio Analysis

    A ratio analysis is a quantitative analysis of information contained in a company’s financial statements.
Trading Center