Difference Between Shares Outstanding vs Float
Company’s quarterly and annual financial statements may refer to multiple types of stock, including authorized, float, outstanding and restricted shares. The annual reports are filed with Securities and Exchange Commission (SEC) and other statutory bodies. Stock data, including the number of authorized shares and something called “float,” reflects the market’s sentiment about the company.
Shares outstanding vs float stocks are different measures of the shares of a particular stock. In case company’s issues more shares, its outstanding shares will increase. The outstanding shares comprise of float stock and restricted stock.
Share Outstanding (Issued stock)
Outstanding shares refer to the shares (issued stocks) held by shareholders, company management, and investors in the public domain (Retail and Institutional investors). However, stocks outstanding do not include treasury stock.
Outstanding shares are recorded on a company’s balance sheet under the head of “Capital Stock.” The number of outstanding shares is used in calculating key metrics such as a company’s market capitalization, as well as its earnings per share (EPS) and cash flow per share (CFPS).
Features of outstanding stock
- Outstanding stocks number should not be greater than the number of authorized shares. Generally, the company authorizes more shares than the actual issuance size due to efficiency and practicality viability.
- In case, the company issues all its authorized shares but need to grant more shares in the future, the company has to authorize more shares at that point. It requires a board and stockholder vote, and then a document to be filed with regulatory bodies.
- It does not include treasury stock, which are stock shares that are repurchased by the company. It also does not include unissued shares
- It can be held for short or medium or long-term basis.
Outstanding Shares Formula
Outstanding Shares = Issued stock – Treasury Stock
A Company has issued 25,000 shares and has offered 3,000 shares to two partners, and has retained 5,600 stocks in the treasury.
- Outstanding shares Formula: Shares issued – treasury shares
= 25,000 – 5,600 – (2 x 3,000) = 13,400.
- Suppose, stock is currently at $50.00. Therefore, the market capitalization of the firm is 13,400x $50.00 = $67,000.
- Company A has a net income of $15,500 as per the latest financials. Therefore, the firm’s earnings per share is $15,500/ 13,400 = $1.16.
The term “float stock” refers to a company’s shares which have been issued to the public and those are available for investors to trade in the stock market. It means that the number of shares available to buy and sell for the investors. It doesn’t count shares owned by company management and internals.
The float is derived by taking a company’s outstanding shares (total shares) and subtracting from it any restricted stock (stock that is under sales restriction). Float stock is important for investors because it indicates how many shares are actually available for general investing public trading. The float value can change from year to year if the company decides to repurchase shares from the market or sell more of its authorized shares internally instead of publicly.
A “low float” stock is one with a relatively low number of shares available for trading. Stocks with a low float and low market-cap tend to be volatile and can make huge moves to the upside very quickly if they have a positive catalyst.
Features of the stock float
- Float stock includes the share of a listed company available to buy or sell for the general public.
- A company’s stock float can play an important factor in the price movement of its stock. A stock with a smaller float is more likely to feel the impact of volume change.
- Management and investors have a lot of confidence in the stock if they are holding a large percentage of it.
- Stocks with smaller floats can become very volatile than those with larger floats.
- It can be held for a short or medium term basis.
Float Stock Formula
Float stock = Outstanding Shares – Restricted Shares
Example: A company may have 6,000 outstanding shares and 1,000 restricted shares with its management and another internal body, then:
- Float stock : Shares outstanding – restricted shares = 6,000 – 1,000 = 5,000
- This is the number available number of stock for the trading.
Head To Head Comparison Between Shares Outstanding vs Float (Infographics)
Below is the top 8 difference between Shares Outstanding vs Float
Key Differences Between Shares Outstanding vs Float
Both Shares Outstanding vs Float are popular choices in the market; let us discuss some of the major Difference Between Shares Outstanding vs Float
- Float constitutes one of two elements present in the total number of outstanding shares. The float plus the total number of restricted shares equals the total number of outstanding shares.
- Outstanding shares compromise various types of shares, while the float shares are only those shares available for trading. Each company issuing restricted and public shares maintains outstanding shares and float.
- Float shares are only shares which are available for the general public whereas share outstanding constitutes all the shares of the company held by its investors.
- Outstanding share constitutes voting right and ownership in a company whereas float share won’t provide voting right and ownership in a company.
- Share outstanding is used in a variety of financial calculations market capitalization, earnings per share whereas float share is only a determinant of the financial calculations.
- If the floating share is well below the share outstanding, the stock price has the potential to be volatile as there are only a few shares for the trading at any given time, a larger public float can mean less volatility.
- Outstanding stocks belong to a private or a public company whereas float stock belongs to public companies which are listed in stock exchange.
Shares Outstanding vs Float Comparison Table
Below is the topmost comparison between Shares Outstanding vs Float
|Basis comparison between Shares Outstanding vs Float||
|Meaning||Outstanding shares refer to the shares held by stockholders, company officials, and investors in the public domain, including retail investors, institutional investors, and insiders||Float stock refers to a company’s shares which have been issued to the public and available for investors to trade in the stock market.|
|Elements||It constitutes both of the elements of a stock float as well as restricted shares.||It constitutes only one element of a stock (float stock only).|
|Availability||It constitutes all the shares of the company held by its investors.||Available for the general public.|
|Financial calculations||Share outstanding is used in a variety of financial calculations market capitalization, earnings per share.||Float share only acts as a determinant of the financial calculations.
|Economic ownership||It gives voting and ownership right.||It won’t provide any voting and ownership right.|
|Issuer||Private or public limited company.||Public companies which are listed in stock exchange.|
|Stock size||It constitutes a major portion of the issued shares (All the stocks of the company except treasury stocks).||It constitutes a minor portion of the issued stock which is available for trading.|
|Risk availability||Low risk||High risk|
Shares Outstanding vs Float – Final Thoughts
Company’s stock structure plays an important role in the growth of the company. There should be a balance between float stock and the stock held by its investors because If the floating share is well below the share outstanding, the stock price has the potential to be volatile as there are only a few shares for the trading at any given time, a larger public float can mean less volatility.
This has a been a guide to the top difference between Shares Outstanding vs Float. Here we also discuss the Shares Outstanding vs Float key differences with infographics and comparison table. You may also have a look at the following articles to learn more