Share Structure - The Different Types of Company Shares Explained
One of the first questions I ask myself when analysing a company's financial statements is: "How Many
Outstanding Shares Does this Company Have?" Shortly followed by: "How Does the Share Structure
When you dig into the accompanying notes to the share capital, which you will find in the annual and quarterly
financial reports, you will find the basic shares outstanding and the fully diluted shares
outstanding. The difference between them is shown in the following table.
Basic Shares Outstanding vs. Fully Diluted Shares Outstanding
Basic Shares Outstanding
Shares which have been issued and are outstanding, often referred to as common
Fully Diluted Shares Outstanding
The total number of common shares that would be outstanding if all convertible
securities, such as (employee) stock options and stock warrants, were exercised.
In the first note at the bottom of this page I will explain which number of outstanding shares I always use
while analysing a company's financial statement.
Restricted shares refer to shares of a company that are not fully transferable until certain
conditions have been met. For example, company insiders often held restricted shares because they are in a lock-up
period following an initial public offering.
Shares that have been repurchased are called treasury shares, because they are held in the
corporate treasury waiting to be cancelled or reissued. Treasury shares are not considered
Floating shares refer to the total number of shares available for trading. Thus, the float is
calculated by subtracting the restricted shares, the insider ownership and the shares owned by
shareholders who own at least 5% of the company's total shares outstanding.
As an investor you should always study the accompanying notes to the share capital. In these notes
(mentioned on the company's balance sheet) you will see if the company has (employee) stock options and/or stock warrants outstanding, including their exercise prices and expiry dates. To find
out why it is so important to study these accompanying notes you should read the second note at the bottom of
How to Short a Stock and Where To Find Short Interest Data.Next
to exemplifying how short sales work, I reveal which resources I use to find data about
short stock positions, short interest and days to cover.
Where to Find a List of Outstanding Canadian Stock Warrants.I
will not only explain what a stock warrant is, but I will also inform you where to find a
list of outstanding Canadian stock warrants.
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Note: I always use the basic shares outstanding
in my calculations in order to analyse a company's financial statements. However, I also inform myself what will
happen to the shares outstanding and to the balance sheet when all the in-the-money (i.e. when
the exercise prices are lower than the current share price) and near-they-money (i.e.
when there is a very small difference between the exercise price and the current share price)securities are
converted into common shares.
Note: Remember that if your entry price in a
stock is higher than the outstanding exercise prices of the (employee) stock options and or stock warrants, your
shares will be diluted as soon as they are exercised!
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How I Conduct My Stock's Due Diligence Investigation Process.If
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Jeroen Snoeks is the founder of UndervaluedEquity.com, a website for
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