Documente Academic
Documente Profesional
Documente Cultură
com
Page 1 of 2
Hold on a minute though - this is not the only way that the number of outstanding shares can fluctuate. In addition to the stocks it issues to investors and executives, many companies offer stock options and warrants. These stock options and warrants are instruments that give the holder a right to purchase more stock from the company's treasury. Every time one of these instruments is activated, the float and shares outstanding increase while the number of treasury stocks decrease. For example, suppose CTC issues 100 warrants. If all these warrants are activated, then Cory's Tequila Corporation will have to sell 100 shares from its treasury to the holders of the warrants. Thus, by following the most recent example, where the number of outstanding shares is 350 and treasury shares is 650, the exercise of all the warrants would change the numbers to 450 and 550 respectively, and the float would increase to 300. This effect is known as dilution. Why Is It Important? Because the difference between the number of authorized and outstanding shares can be so large, it's important that
http://www.investopedia.com/printable.asp?a=/articles/basics/03/030703.asp
09/06/2007
Page 2 of 2
you realize what they are and which figures the company is using. Different ratios may use the basic number of outstanding shares while others may use the diluted version. This can affect the numbers significantly and possibly change your attitude towards a particular investment; furthermore, by identifying the number of restricted shares versus the number of shares in the float, investors can gauge the level of ownership and autonomy that insiders have within the company. All these scenarios are important for investors to understand before they make a decision to buy or sell.
** This article and more are available at Investopedia.com - Your Source for Investing Education **
http://www.investopedia.com/printable.asp?a=/articles/basics/03/030703.asp
09/06/2007