Shares outstanding are the total number of a company’s shares that people currently own.
These people can be:
- Regular investors (like you and me)
- Big investment companies (called institutional investors)
- People who work at the company (like founders, CEOs, or employees)
These shares represent who owns the company.
In this blog, you’ll learn:
If you’re ready to boost your financial knowledge and make smarter decisions, let’s get started.
What is Shares outstanding?
Let’s say a company creates 1,000 total shares. But it retains 100 shares for itself (these are referred to as treasury shares).
So, the number of shares that are actually owned by people is:
1,000 – 100 = 900 shares outstanding
That’s what we call shares outstanding.
Plus, it’s very important to understand if you’re thinking about investing or just want to learn how companies work.
Why are Shares Outstanding Important?
They help calculate 2 very important things:
a. Market Capitalization (or Market Cap)
This tells you what the company is worth on the stock market.
Formula:
Market Cap = Shares Outstanding × Share Price
Example:
Let’s say the company has 900 shares outstanding, and each share costs $10.
900 × $10 = $9,000 market cap
That means the company is valued at $9,000 in the stock market.
b. Earnings Per Share (EPS):
This tells you how much profit the company earns per share.
More shares = less profit per share.
Fewer shares = more profit per share.
So, shares outstanding affect how profitable a company looks to investors.
Can this number change?
Yes! The number of shares outstanding can go up or down over time.
- If the company gives out more shares, the number goes up
- If the company buys back some shares, the number goes down
You’ll find the number of shares outstanding on the company’s balance sheet under “Capital Stock.”
To sum up:
Shares outstanding = shares owned by people
They’re key to knowing how big a company is and how profitable it really is.
Shares Outstanding Formula:
There’s an easy formula to figure out how many shares are outstanding.
Meaning, how many shares are owned by people (not held by the company itself).
Formula: Outstanding Shares = Issued Shares – Treasury Shares
What does that mean?
- Issued Shares = All the shares a company has ever created
- Treasury Shares = The shares the company keeps for itself (not sold to anyone)
So, when you subtract the treasury shares from the total issued shares, you get the number of outstanding shares, the ones owned by investors, employees, or big institutions.
Example:
A company issues 1,000 shares, but keeps 100 shares for itself.
Outstanding Shares = 1,000 – 100 = 900 shares
That’s the number used to calculate market cap and other important financial stats.
Different Types of Shares Outstanding
When looking at how many shares a company has, there are 2 main types you’ll come across:
a. Basic shares outstanding:
Basic outstanding shares are the shares that are easily available to trade in the secondary market.
These are the actual shares currently owned by investors, such as:
- The public
- Company employees
- Institutional investors
This number is used in simple calculations, such as Basic Earnings Per Share (EPS).
It shows how many shares are already out there today.
b. Fully diluted shares outstanding:
Fully diluted outstanding shares that include both tradable shares and the convertible financial instruments, like shares, warrants, etc.
This includes all the shares that could exist in the future if certain events happen, such as:
- Employees using their stock options
- Convertible bonds turning into shares
- New shares issued through other programs
This gives a more complete picture of potential ownership and is used to calculate diluted EPS.
What are Weighted Averages?
Sometimes, the number of shares changes during the year.
For instance, when a company issues new shares or buys some back.
To account for this, analysts use weighted averages instead of just a single point in time.
These are of 2 types:
→ Weighted average basic shares outstanding: This means the average number of basic shares a company has during a certain time, like a few months or a year.
It counts changes that happen over that time.
→ Weighted average diluted shares outstanding: This is the average number of shares, including extra possible shares that might come in the future.
This gives a more accurate view of a company’s performance over time.
Quick recap:
| Type of Shares | Meaning |
| Basic Shares Outstanding | Shares currently held by investors |
| Fully Diluted Shares | Shares that could exist in the future |
| Weighted Avg Basic Shares | Average real shares during the time |
| Weighted Avg Diluted Shares | Average real shares plus possible extra shares during the time |
Shares Outstanding Test:
The shares outstanding test helps confirm that a company:
- Has enough shares actively held by investors
- Meets exchange rules for public trading
- Is being transparent and consistent with its share data
Conclusion
In this blog, we learned the shares outstanding meaning, which are the shares owned by investors, excluding the shares the company keeps for itself.
We also covered the shares outstanding formula to calculate this important number.
Understanding shares outstanding is very important because it shows how many shares are actually available in the market.
We also talked about different types of shares outstanding and why knowing these differences helps you make smarter decisions when investing.
By learning about shares outstanding now, you’ll be better prepared to analyze companies, understand their value, and make confident investment choices in the future.
All the best, you’ve got this!
