What’s the Difference Between Issued and Outstanding Shares

Issued shares represent all shares that the company has created and allocated to investors, employees, or other stakeholders. This includes shares that remain in circulation as well as those repurchased and held as treasury shares after buybacks.

Outstanding shares, on the other hand, refer only to shares actively held by shareholders, excluding treasury shares. 

What are issued shares?

Issued shares are the portion of a company's authorised shares that have been allocated to shareholders. This includes shares held by founders, employees, and investors, as well as those held by the company as treasury shares.

Authorised shares refer to the maximum number of shares a company is legally allowed to issue, as defined in its incorporation documents (e.g., Articles of Association). Companies often authorise more shares than they issue to allow flexibility for future fundraising or employee stock options.

Issued shares include outstanding shares (shares held by shareholders) and treasury shares (shares repurchased by the company).

What are outstanding shares?

Outstanding shares refer to the total number of shares that are currently held by shareholders. 

They are a subset of issued shares but exclude certain categories of shares that the company has issued but do not count as part of public ownership.

It represents only the shares that are currently in circulation and excludes shares that have been issued but repurchased by the company (treasury shares).

How do issued and outstanding shares work?

A company starts with a certain number of authorised shares, which defines the maximum number of shares it can issue. 

Issued shares are the portion of a company’s authorised shares that has been allocated to investors, employees, or other stakeholders. These shares define ownership, voting rights, and financial interest in the company.

While a company may authorise a large number of shares, it typically issues only a portion of them initially, retaining the ability to issue more in the future.

For example, a company may incorporate with 10M authorised shares but issue only 5M shares to founders and seed investors at the outset. At this stage:

• Authorised shares: 10M
• Issued shares: 5M
• Outstanding shares: 5M (same as issued shares since no shares have been repurchased by the company)

Later, the company raises a Series A round, issuing 1M new shares to investors and granting 500,000 stock options). 

At this stage:

• Issued shares increase to 6M (5M from the seed round + 1M from Series A).
• Outstanding shares remain the same as issued shares at 6M, as all issued shares are actively held by investors.

Since stock options are not actual shares until they are exercised, they are not included in issued shares at this point. Instead, they are part of the company’s fully diluted share count, which accounts for all potential shares that could be issued in the future.

If employees later exercise their stock options and convert them into common shares, those shares are then included in the issued share count. 

Assuming all 500,000 stock options are exercised:

• Issued shares increase to 6.5 million (now including the stock options). 
• Outstanding shares also increase to 6.5 million, as these shares are now held by employees. 

However, if the company repurchases 500,000 shares from the market, the share structure changes.

• Issued shares remain at 6.5 million, as repurchased shares are still issued.
• Outstanding shares drop to 6 million since the repurchased shares become treasury shares (shares held by the company and no longer in public circulation).

What is included in issued shares?

Issued shares include all shares that a company has formally allocated to its stakeholders. It includes all of the following:

1. Common shares (Ordinary shares)

Common shares form the foundation of a company’s ownership structure.

Holders of these shares have voting rights, allowing them to influence corporate decisions such as electing board members.

These shareholders also receive dividends if and when the company declares them, but they are last in line to receive payouts in the event of liquidation.

Common shares form the foundation of a company's issued and outstanding shares. They can be structured into different classes, each with distinct voting rights.

2. Preferred shares

Preferred shares prioritise financial security over governance rights. These shares usually do not carry voting rights, meaning their holders have little influence over company decisions. 

However, in exchange for this limitation, preferred shareholders have a higher claim on company assets than common shareholders in the event of liquidation.

Certain preferred shares, such as Compulsory Convertible Preference Shares (CCPS), can be converted into common shares under specific conditions. This conversion impacts future ownership distribution, as it increases the number of common shares in circulation.

3. Treasury shares (Repurchased shares)

Treasury shares are shares that a company has issued but later repurchased from the market. These shares do not count as outstanding shares and do not carry voting rights or dividend entitlements. 

Companies often buyback shares to reduce dilution, boost stock prices, or maintain flexibility for future issuance.

From an accounting perspective, treasury shares reduce the total number of outstanding shares but remain part of the issued share count, impacting per-share metrics such as earnings per share (EPS).

4. Restricted shares

Restricted shares are issued shares that come with certain restrictions, such as a vesting schedule or transfer limitations, for example, Restricted Stock Awards (RSA). They are commonly granted to executives and employees as part of an equity incentive plan.

Even though they are issued, they may not immediately carry full shareholder rights (such as voting or dividend entitlements) until they vest. 

However, because they are issued from the start, they count as part of the company’s issued share count even before vesting. Once vested, the restrictions are lifted, and they become fully tradable common shares.

5. ESOPs and RSUs

Unlike restricted shares, ESOPs and RSUs do not count as issued shares when granted. 

They represent a right to acquire shares in the future rather than immediate ownership. ESOPs allow employees to buy shares at a predetermined price after meeting certain conditions (vesting and exercise), while RSUs grant shares automatically upon vesting.

Since these instruments do not become common shares until they are exercised (ESOPs) or vested (RSUs), they are not included in issued shares but are accounted for in the fully diluted share count to reflect potential future dilution.

What is included in outstanding shares?

Outstanding shares represent the total number of shares actively held by stakeholders. These shares are part of the issued share count but exclude treasury shares.

1. Basic outstanding shares

Basic outstanding shares represent the current number of shares that are issued and actively held by shareholders without considering potential dilution.

It includes:

• Common shares held by investors and employees
• Vested RSUs and exercised ESOPs 
• Preferred shares 
• Restricted shares that have vested

Basic outstanding shares exclude:

• Treasury shares (shares repurchased by the company and held in its treasury)
• Unvested RSUs, unexercised ESOPs, and other contingent equity
• Convertible notes or CCPS that hasn’t been converted yet

At any given time, basic shares represent the actual shares in circulation that influence ownership and voting rights.

2. Fully diluted shares

Fully diluted shares represent the total number of shares that would be outstanding if all potential sources of dilution were exercised or converted into common stock. These shares reflect the maximum possible dilution in the company’s ownership structure.

Fully diluted shares are calculated by adding the following to basic outstanding shares:

• Stock options that could be exercised
• RSUs that have been granted but not yet vested
• CCPs and convertible notes
• Warrants that allow investors to purchase shares at a predetermined price

Since diluted shares account for all possible equity dilution, they are important for understanding the true ownership structure and potential future share count.

Difference between issued and outstanding shares

Issued shares refer to the total number of shares a company has allocated from its authorised shares. These shares can be held by investors, employees, or other stakeholders. Issued shares also include treasury shares, which are shares repurchased by the company and held in its own treasury.

Since these treasury shares are not available for trading or voting, they do not contribute to the company’s market capitalisation or shareholder control.

Outstanding shares, on the other hand, only represent the number of issued shares that are actively held by shareholders and are available in the market. This number excludes treasury shares and any restricted award that has not yet vested.

Outstanding shares determine ownership percentages, voting power, and key financial metrics like earnings per share (EPS) and market capitalization.

A key distinction between the two is that issued shares are always greater than or equal to outstanding shares.

FAQs

1. Can outstanding shares be more than issued shares?

No, outstanding shares cannot exceed issued shares. Issued shares include both the shares currently in circulation (outstanding) and any repurchased shares that the company holds in treasury, while outstanding shares represent only the total number of shares held by investors, excluding treasury stock. 

2. How to calculate issued and outstanding shares?

Issued shares represent the total number of shares a company has ever issued.

Outstanding shares are calculated by subtracting shares that are no longer available for trading, such as treasury shares, from the total issued shares.

3. Why do outstanding shares matter for investors?

Investors track outstanding shares because they directly impact key financial metrics.

Earnings per share (EPS) is calculated by dividing net income by outstanding shares. A higher outstanding share count lowers EPS, while share buybacks increase it.

Additionally, outstanding shares determine market capitalization (stock price × shares outstanding).

4. How can stock buybacks affect outstanding shares?

Stock buybacks reduce the number of outstanding shares by repurchasing them from the market.

This can boost the value of remaining shares, enhance earnings per share (EPS), and strengthen existing shareholders' control.

5. Can a company issue more shares in the future?

When a company is incorporated, it sets an authorised share capital, which defines the maximum number of shares it can issue. If the company has unissued shares within this limit, it can allocate them to raise capital or grant employee stock options.

If the company wants to issue shares beyond its authorised limit, it must get shareholder approval to increase its authorised share capital.