Outstanding shares are the shares a corporation has issued that are currently held by its shareholders, which is the issued count less any shares the corporation has reacquired and still holds uncancelled. A share is outstanding from the moment it is issued until the corporation takes it back or it stops existing as that share. The count belongs to a date rather than to a period, so a figure given without one is incomplete.
What Ends Outstanding Status
Washington’s Business Corporation Act puts the rule in a single sentence. A corporation may issue the number of shares of each class or series authorized by the articles of incorporation, and shares that are issued are outstanding shares until they are reacquired, redeemed, converted, or canceled (RCW 23B.06.030(1)). Virginia’s Stock Corporation Act carries the same language (Va. Code § 13.1-640(A)).
Each of those four events drops the share out of the count, and they are not interchangeable. Reacquisition and redemption both take the share back from its holder. Conversion exchanges it for shares of another class at whatever rate of exchange the terms of that class set, so the converting class loses the share and the receiving class gains whatever that rate produces (8 Del. C. § 151(e)). Cancellation ends the share’s issued status outright.
Where a reacquired share goes next is a question of state law rather than an accounting choice, and it decides whether an issued-but-not-outstanding layer exists at all. That split, and the buyback mechanics behind it, are worked through in treasury shares. The two counts outstanding is measured against, the authorized ceiling in the articles or certificate of incorporation and the issued count beneath it, sit in issuance. A stock split moves the count a fifth way, with no consideration passing at all.
Why Outstanding Status Carries the Vote and the Residual
Corporate rights travel with outstanding status, not with the bare fact that a share was once issued. Delaware pins the stockholder vote on an amendment to the certificate of incorporation to that count. If no vote of stockholders is required to effect the amendment, or if a majority of the outstanding stock entitled to vote thereon, and a majority of the outstanding stock of each class entitled to vote thereon as a class, has been voted in favor of the amendment, a certificate setting forth the amendment is executed, acknowledged and filed (8 Del. C. § 242(b)(1)).
The section carries its own exceptions, so the outstanding count does not decide every amendment. No meeting or vote of stockholders is required for an amendment that affects only a change of corporate name, or that subdivides the issued shares of a class into a greater number of shares of the same class where the corporation has only one class of stock outstanding and that class is not divided into series (8 Del. C. § 242(d)(1)). An increase or decrease in the authorized shares of a class listed on a national securities exchange, or a combination of its issued shares into a lesser number, may be made without the vote subsection (b) would otherwise require, on conditions that include the class continuing to meet the exchange’s minimum-holder listing requirement and the votes cast for the amendment exceeding the votes cast against it (8 Del. C. § 242(d)(2)).
The denominator in the subsection (b) test is the outstanding stock, and shares of a corporation’s capital stock are neither entitled to vote nor counted for quorum purposes if they belong to the corporation (8 Del. C. § 160(c)).
Washington keeps two rights from ever going missing. At all times that shares of the corporation are outstanding, one or more shares that together have unlimited voting rights and one or more shares that together are entitled to receive the net assets of the corporation upon dissolution must be outstanding (RCW 23B.06.030(3)). The vote and the residual claim are pinned to outstanding shares by statute, and what a repurchase does to them is covered in treasury shares.
What those rights actually consist of is set out in stockholder, and the proportionate stake a holder ends up with is in equity ownership.
The Point-In-Time Count and the Weighted-Average Count
A per-share figure for a period cannot use one date’s count, because the count moves during the period. Basic earnings per share is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding during the period, and shares issued during the period and shares reacquired during the period are weighted for the portion of the period that they were outstanding (FASB Statement No. 128, paragraph 8).
Say a corporation begins its calendar year with a single class of common stock and buys shares back at the start of the fourth quarter, holding them uncancelled.
shares outstanding, January 1 1,000,000
shares repurchased, October 1 120,000
point-in-time count, December 31 1,000,000 - 120,000 880,000
weighted average for the year
January 1 to September 30 1,000,000 x 9/12 750,000
October 1 to December 31 880,000 x 3/12 220,000
weighted-average count 750,000 + 220,000 970,000Both numbers are correct and they answer different questions. The December figure is what the company had on the last day. The weighted average is what it had on average across the year, and it is the denominator a per-share computation uses, worked through in diluted earnings per share.
Where an SEC Filer States the Count
Two documents ask for the count, and they ask as of different dates.
On the balance sheet, Regulation S-X asks for whichever of issued or outstanding is appropriate for each class of common shares (17 CFR 210.5-02, caption 29). The count that lands there is struck as of the balance sheet date, and the caption itself is walked through in common stock.
On the cover page, an Exchange Act filer states a fresher one. Form 10-K directs a corporate registrant to indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date (SEC, Form 10-K), and Form 10-Q puts the same instruction to the issuer (SEC, Form 10-Q).
So one filing can carry two different share counts without either being an error. The balance sheet counts what existed at the period end, and the cover page counts what exists closer to the day the document goes out. A preparer reconciling the two is reconciling dates, not figures.
What Outstanding Shares Are Confused With
Authorized shares are the ceiling the charter sets, called the articles of incorporation in Washington and Virginia and the certificate of incorporation in Delaware, so they are a limit on future issuances rather than a count of anything held by anyone. That ceiling is in issuance.
Issued shares are what has actually gone out under that ceiling. Issued and outstanding are the same number for a corporation that has never reacquired any of its own stock. Whether the two part company when it does is a question of state law, because they diverge only where a reacquired share may be retained uncancelled, and in Washington a corporation may acquire its own shares and shares so acquired constitute authorized but unissued shares (RCW 23B.06.310(1)), so the two counts fall together there.
Treasury shares are the gap between the two where state law allows a reacquired share to be retained uncancelled. They are issued and not outstanding at the same time, which is the whole reason the two captions are stated separately.
Public float is a different measure entirely, and it ends in dollars rather than in shares. Under the definition of a smaller reporting company, for issuers that are required to file reports under section 13(a) or 15(d) of the Exchange Act, public float is measured as of the last business day of the issuer’s most recently completed second fiscal quarter and computed by multiplying the aggregate worldwide number of shares of its voting and non-voting common equity held by non-affiliates by the price at which the common equity was last sold, or the average of the bid and asked prices of common equity, in the principal market for the common equity (17 CFR 240.12b-2, definition of smaller reporting company, paragraph (3)(i)(A)). A determination based on an initial registration statement runs off a different date, within 30 days of the date the registration statement is filed (17 CFR 240.12b-2, paragraph (3)(ii)(A)). It counts only the non-affiliate shares, and it multiplies them by a price.
Common Questions
Take the issued count as of a stated date and subtract any shares the corporation has reacquired and still holds uncancelled. Where state law sends a reacquired share back to authorized but unissued, as Washington does (RCW 23B.06.310(1)), there is nothing to subtract, because the issued count has already fallen with it. A per-share figure for a period uses the weighted-average count rather than the count on any one date.
Shares is the security. Outstanding is a status that security holds at a given moment, and the status is what the statutes attach consequences to. Shares that are issued are outstanding shares until they are reacquired, redeemed, converted, or canceled (RCW 23B.06.030(1)), so the same share can be outstanding, stop being outstanding, and become outstanding again on a later reissue without ever changing what it is.
Common stock is a class of security, and outstanding shares are a count. A corporation can have common stock outstanding, preferred stock outstanding, or both, and Regulation S-X asks for the counts class by class rather than in one total, with common shares at caption 29 and preferred at captions 27 and 28 (17 CFR 210.5-02). The dollar figure on the common stock line is a capital amount for that class rather than a share count, and caption 29 asks for both the count and the dollar amount on the face of the balance sheet, which common stock works through.
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