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Outstanding Shares Formula and Calculation

The outstanding shares formula is represented as issued shares minus shares held in the company’s treasury or treasury stock. Through this formula, one can determine the outstanding shares of a company.

What are outstanding shares?

Outstanding shares are the company’s stock that shareholders are currently holding which includes shares that institutional investors hold as well as restricted shares that company officers and insiders own. In other words, they are shares that are available with the company’s shareholders after excluding the shares that the company bought back, that is treasury stock. It is shown as part of the owner’s equity on the liability side of the balance sheet, under the heading, “Capital Stock”.

We can say that Any authorized shares that are held by the corporation’s shareholders or are sold to them, excluding treasury stock which the company holds itself, are shares outstanding.

Analysts use the number of outstanding shares in calculating key metrics such as a company’s market capitalization, earnings per share (EPS), and cash flow per share (CFPS). The number of a company’s shares outstanding is not static, it is bound to fluctuate over time.

Oftentimes, a company keeps a portion of its outstanding shares in its treasury from both initial stock issues and stock repurchases or treasury shares/stock. They are not included in the balance and increasing them will always bring about decreases and vice-versa.

The number of outstanding stocks is a representation of the amount of stock in the open market. As earlier stated, it includes the shares that institutional investors hold and restricted shares that insiders and company officers hold.

The outstanding shares of a company can fluctuate for a number of reasons. The number of these shares will increase if the company issues additional shares. Typically, companies issue shares when raising capital through equity financing or upon exercising employee stock options (ESO), or other financial instruments. On the other hand, outstanding shares will decrease if the company buys back its shares under a share repurchase program.

Another factor that causes the outstanding stocks of a company to fluctuate is the stock split. The number will increase if a company undertakes a stock split. On the other hand, it will reduce if the company undertakes a reverse stock split. Usually, companies undertake stock splits in order to bring a company’s share price within the buying range of retail investors. On the other hand, a company generally embarks on a reverse split or share consolidation if it wants to bring its share price into the minimum range necessary to satisfy exchange listing requirements.

When the number of outstanding shares increases, the company’s liquidity improves. On the other hand, a lower number of outstanding shares can hamper a company’s liquidity, it also has the capacity to deter short sellers since it will become more difficult to borrow shares for short sales.

Aside from listing shares outstanding or capital stock on the company’s balance sheet, publicly traded companies are obliged to report the number of issued and outstanding shares and generally make this information available within the investor relations sections of their websites or on local stock exchange websites. In some nations such as the United States, these figures are accessible from the Securities and Exchange Commission (SEC) quarterly filings.

An infographic describing outstanding shares.
An infographic describing outstanding shares and the outstanding shares formula

Outstanding shares formula

The formula for calculating outstanding shares is represented below

Outstanding shares = Issued stock – Treasury stock


Outstanding shares = Issued stock – treasury shares – restricted shares

In the formulas above, the number of shares outstanding is equal to the number of issued shares minus the number of shares held in the company’s treasury. It is also equal to the float, which is shares available to the public and excludes any restricted shares or shares held by the company officers or insiders, plus any restricted shares.

Outstanding shares calculation

We have seen outstanding shares as the total number of shares that a corporation has issued to investors. In order to calculate the total number of outstanding shares, these steps have to be followed:

Take a look at the balance sheet of the company in question, and go to the shareholders’ equity section which is close to the bottom of the report.

Look into the line item for preferred stock, this line makes reference to a special class of shares that gives investors certain privileges such as a periodic dividend. It is possible to find out that there is no preferred stock at all. There should be a description that states the number of shares outstanding. Retain the number of preferred shares outstanding.

Look at the line item for common stock, this is the main class of stock that is being issued to investors. Also, there should be a statement or brief description within that line stating the number of shares outstanding. Retain the figure of the common shares outstanding.

Also, look at the line item for treasury stock which is making reference to the shares that have been bought back from investors by the issuing company. If the corporation has never bought back shares from investors, then there will be no line item for treasury stock. If the line is in existence, then there should be a descriptive statement within the line stating the number of shares that have been repurchased from investors. Retain this number as well.

Sum up the numbers of preferred and common shares outstanding and subtract the number of treasury shares. This will result in the total number of shares outstanding.

If there exists a difference between the number of shares issued and outstanding shares, the difference is treasury stock. In other words, the company issued some shares to investors and then bought back some of the shares. This in turn leaves a reduction in the number of shares that is currently outstanding.

The figure for outstanding shares is useful for an investor to know, especially for an investor that is contemplating buying shares in a company. When you divide the number of shares purchased by the number of shares outstanding, it reveals the percentage of ownership that the investor will have in the business after the shares have been purchased.


Let us look at a practical example;

Company XYZ is a leading retail company that sells cell phones. Recently, the company issued 26,900 shares through an initial public offer (IPO). It also offered 3000 shares to each of the two managing directors and has 5,600 treasury stock.

Charlie as an investor will love to determine the company’s market capitalization and its earnings per share. First of all, he will have to calculate the total number of outstanding shares.

Using the formula above, we will compute the figures.

Outstanding shares = Issued shares – Treasury shares – Restricted shares

Outstanding shares = 26,900 – 5,600 – (2 x 3,000)

Outstanding shares = 15,300

XYZ’s stock is currently trading at $28.67, therefore, the market capitalization of the company is;

Market Cap = 15,300 x $28.67

Market Cap = $438,651

XYZ,s report of earnings shows a net income of 14,500, therefore, the earnings per share will be as follows;

Earnings per share = 14,500 / 15,300

Earnings per share = $0.9477

If after three months, the company decides to repurchase 1000 shares and the stock is trading at $27.49, the company’s outstanding shares will be as follows;

Outstanding shares = 15,300 – 1,000

Outstanding Shares = 14,300

The company’s market capitalization will be as follows;

Market Cap = 14,300 x $27.49

Market Cap = $393,107

With fewer outstanding shares in the market, the earnings per share will be increased as follows;

Earnings per share = $14,500 / 14,300

Earnings per share = $1.013

At the end of it all, the number of outstanding shares decreased by 1000 shares while earnings per share increased by 6.89%.

Types of outstanding shares

  1. Basic outstanding share
  2. Diluted outstanding share

Basic shares refer to the number of outstanding shares that are currently outstanding while diluted shares put into consideration things such as warrants, capital notes, and convertible stock. In essence, the fully diluted number of outstanding shares tells us the number of shares outstanding there could potentially be.

Warrants are those instruments that give the shareholder a right to buy more shares outstanding from the company’s treasury. Whenever a company activates warrants, there will be an increase in outstanding stocks while the number of treasury stocks decreases. For example, if a company issues 100 warrants and all the warrants are activated, this company will have to sell 100 shares to all the warrant holders from its treasury.

Outstanding vs issued shares

The major difference between outstanding and issued shares is that outstanding shares are the shares available with the shareholder at a given period after excluding treasury shares. On the other hand, issued shares are the total shares a company issues to the public in order to raise funds.

Shares outstanding vs market cap

While shares outstanding refers to the number of shares that are currently being held by shareholders, market capitalization on the other hand is the monetary value that changes daily as the share price of a company changes daily. Because of the fact that companies vary in size, market cap values are being categorized in order to help simplify company valuation.

Outstanding shares vs float

Outstanding shares are the total shares of a company that is being owned by shareholders while float on the other hand is the number of shares that are available for trading by members of the public.

FAQs on outstanding shares

What are outstanding shares examples?

An example is; a company that issues a total of 1000 shares. 600 shares are issued as floating shares to the general public, 200 shares are issued as restricted shares to company insiders, and 200 are kept in the company’s treasury. We will say that the company has 800 outstanding shares and 200 treasury shares.

Is shares outstanding a good thing?

Outstanding shares are useful especially to an investor who is contemplating investing in a company. It is also useful in determining financial metrics such as market capitalization and earnings per share.

How do you calculate the outstanding shares?

Outstanding shares are calculated by subtracting treasury shares from issued shares.