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What is an Outstanding Stock?

Malcolm Tatum
Updated May 17, 2024
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Outstanding stock is shares of stock that is help by investors in a given company. This designation of shares does not include any shares that are still held by the issuer, although any shares owned by officers of the issuing company would also be considered outstanding. These shares of outstanding stock are accounted for in the issuer’s financial records by reporting them on the company balance sheet, typically under the heading of capital stock. Knowing the amount of shares that are outstanding is important when calculating figures like the market capitalization and earnings per share for a given period.

Sometimes referred to as shares outstanding, investors who hold outstanding stock typically hold shares of common stock. This means that investors usually have voting privileges based on the number of shares they hold, as well as other benefits and responsibilities that are defined in the terms of issue associated with those shares. Shares of common stock that are still in the possession of the issuer are sometimes referred to as treasury stock, and are accounted for in the issuer’s accounting records in a manner that allows them to be segregated from shares that are in the possession of investors.

Typically, a company will attempt to balance the number of shares of outstanding stock with the number of shares that are held as treasury stock. The idea is to make sure that the company owners retain controlling interest in the business at all times. This is important for a number of reasons, including the ability to effectively manage the direction that a company takes. At the same time, managing to retain a majority interest in the business helps to strengthen the position of the owners in the event of a hostile takeover attempt.

In many nations, investors who secure over a certain percentage of outstanding shares issued by a specific company must file documents with a government regulatory agency. While the content of those documents vary, some do require that the investor identify the intent behind the purchases. This is often one of the ways that company owners learn of an impending takeover attempt, allowing them to launch their own campaign to repurchase as many shares of outstanding stock as possible before the corporate raider is able to acquire those shares. Doing so helps to neutralize the takeover attempt since the raider is unable to acquire enough shares to force any particular action that would make the takeover possible.

WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum , Writer
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including WiseGeek, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.

Discussion Comments

By nony — On Feb 07, 2012

@SkyWhisperer - I had no idea that companies attempting a hostile takeover must declare their intentions for buying the stock. That’s laughable!

So if company X wants to initiate a hostile takeover of company Y, they need to write down on paper, “We are buying these many shares as part of a hostile takeover attempt”?

I’d think they’d be a little more discrete, but I guess the laws are in place to protect company Y. Frankly, I think that hostile takeovers should be banned. If you want to buy a company, make a proposal and come to the bargaining table.

By SkyWhisperer — On Feb 06, 2012

@Charred - You can’t necessarily draw that conclusion. According to the article, massive insider buying of shares of stock outstanding may simply mean that the company is trying to thwart a hostile takeover attempt, not necessarily that they think there is a rosy picture in their future.

Doesn’t a hostile takeover attempt itself mean the company is doing well? That’s not true either. The “raider” may have other designs on the company, like buying off its assets and parceling it off, piece by piece.

Basically, what I am saying is that there is no shortcut for you as an investor for knowing for certain whether to buy or sell. Due diligence is the key.

By Charred — On Feb 05, 2012

The question I have as an individual investor is what can I learn about a company by knowing the number of stock shares outstanding for the firm?

I know what the company uses the number for, but what conclusions can I draw as an investor? Personally, I’d follow the trends. If I saw a trend where the number of shares outstanding was fewer and fewer, that could be bad news. It means that there is a sell off where fewer investors are putting their money into the company.

However, if subsequent to this decline in investment there is a massive uptick in insider buying, that’s good news. That means the officers of the company are confident that the company is doing well. That may be a buy signal.

Malcolm Tatum

Malcolm Tatum


Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
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