Shares outstanding may be less than shares issued.

Question

Quizplus · Accepted Answer

Shares outstanding may indeed be less than shares issued, and this is a common occurrence in the corporate world. To understand why this happens, it's important to differentiate between the two terms:1. Shares Issued: This refers to the total number of shares that a company has ever issued. It includes all shares that have been created and distributed to shareholders as part of initial public offerings (IPOs), secondary offerings, or other forms of issuance. Once a share is issued, it remains counted as an issued share unless it is retired.
2. Shares Outstanding: This is the number of shares that are currently held by all shareholders, including insiders, institutional investors, and the general public. It does not include treasury shares, which are shares that the company has repurchased from investors and holds in its own treasury.
The reason shares outstanding can be less than shares issued is primarily due to a company's buyback programs. When a company buys back its own shares, those shares become treasury shares and are no longer considered outstanding. However, they are still counted as issued shares because they were once part of the market and could potentially be reissued in the future.
Another reason for the discrepancy could be due to the use of stock for employee compensation. Companies often issue new shares to employees as part of stock compensation plans, but these shares might not immediately become outstanding if they are subject to vesting periods or other restrictions.
In summary, shares outstanding are less than shares issued when a company repurchases its shares or holds back issued shares for future use, such as employee compensation plans. The difference between the two figures is an important metric for investors, as it can influence the earnings per share (EPS) calculation and the overall market valuation of the company.

Shares Outstanding May Be Less Than Shares Issued