When you are investing in stocks, you need to analyze the company. The company’s condition will affect the security of your investment and the amount of profit you will get in the future. Therefore, to analyze the company, you need to understand these stock shares terms.
According to The Balance, there are five basic stock shares terms that investors should understand.
1. Authorized Shares
It represents the total number of shares available when the company was created. To increase these shares, the company needs a vote by the shareholders.
The company usually also does not issue all of them to the public.
If a company retains a big percentage of the authorized shares in their treasuries or restricted shares, then the company wants to avoid other companies or parties to seize control in an unfriendly takeover.
Or else, this company wants to have stock handy for the future issue instead of using debt to buy another company or for another major expenditure.
2. Unissued Shares
It is the shares company retains in its treasury. These shares are not issued to the public or employees.
3. Restricted Shares
The company usually use this share as employee incentive and compensations plan. After a company first goes public, usually, there is a waiting period where insiders’ restricted stock is frozen.
If they want to sell their stock, then, they need to file a form to the government authority.
The sales of restricted shares nothing of interest to investors. However, if in a young company there are a big number of restricted shares planned to be sold it could signal trouble.
Also read: Stock Trading 101: Common Stock vs. Preferred Stock
4. Float Shares
It refers to the total number of shares available for trade in the open market. We are all can buy these shares.
Very small float shares that attract the intention of investors could bring supply and demand imbalance. Resulting in the volatile situation for the company.
5. Outstanding Shares
It refers to all the shares issued by the company, including the restricted and the float shares.