Share Outstanding Brief Introduction
Share outstanding, often referred to simply as “outstanding shares,” are a fundamental concept in finance and investing. They represent the total number of a company’s shares of stock that are currently owned by shareholders, both institutional and individual. In this article, we will delve into what shares outstanding are, how they are calculated, and why they matter. To illustrate this concept, we will use real-life examples from two prominent companies: Apple Inc. and Tesla, Inc.
What is Share Outstanding?
Shares outstanding are the total number of a company’s shares of common stock that have been issued and are available for trading in the open market. These shares represent ownership in the company and typically carry voting rights. Understanding the number of shares outstanding is essential for various financial and investment analyses.
How is Share Outstanding Calculated?
The calculation of share outstanding is relatively straightforward. It involves counting all the issued and outstanding shares of a company’s common stock. Common stock is the most basic form of ownership in a corporation and is generally the type of stock that is publicly traded.
Why Do Share Outstanding Matter?
Shares outstanding matter for several reasons:
1. Market Capitalization: Share outstanding play a crucial role in calculating a company’s market capitalization. Market cap is computed by multiplying the current market price of a single share by the total number of outstanding shares. It provides an indication of the company’s size within the stock market.
2. Ownership Structure: The number of share outstanding can reveal the ownership structure of a company. A high percentage of shares held by insiders (company executives and employees) may indicate a closely held company, while a lower percentage suggests broader ownership.
3. Earnings per Share (EPS): EPS is a key financial metric that indicates a company’s profitability. It is calculated by dividing the company’s net income by its weighted average shares outstanding during a specific period. Higher EPS can be attractive to investors.
4. Valuation Metrics: Various valuation metrics, such as the price-to-earnings (P/E) ratio and price-to-sales (P/S) ratio, use shares outstanding as part of their formulas to assess a company’s relative valuation.
5. Investor Sentiment: Changes in shares outstanding can reflect investor sentiment. For example, an increase in outstanding shares through a secondary offering may indicate a company’s growth plans, while a decrease could signal a share buyback program.
Real-Life Examples: Apple Inc. and Tesla, Inc.
Apple Inc. (AAPL)
As of the latest available data, Apple Inc. had approximately 16.7 billion shares outstanding.
– Apple’s Stock Price (as of September 2021): Approximately $150 per share.
Using this information, we can calculate Apple’s market capitalization:
Market Capitalization (AAPL) = Stock Price × Total Shares Outstanding
Market Capitalization (AAPL) = $150 × 16,700,000,000 ≈ $2.505 trillion
Therefore, as of September 2021, Apple Inc. had a market capitalization of approximately $2.505 trillion, making it one of the largest publicly traded companies globally.
Tesla, Inc. (TSLA)
As of the latest available data, Tesla, Inc. had approximately 950 million share outstanding.
– Tesla’s Stock Price (as of September 2021): Approximately $750 per share.
Using this information, we can calculate Tesla’s market capitalization:
Market Capitalization (TSLA) = Stock Price × Total Shares Outstanding
Market Capitalization (TSLA) = $750 × 950,000,000 ≈ $712.5 billion
As of September 2021, Tesla, Inc. had a market capitalization of approximately $712.5 billion, reflecting its status as a major player in the electric vehicle industry.
Share outstanding are a fundamental aspect of a company’s equity structure, with implications for market capitalization, ownership, financial metrics, valuation, and investor sentiment. By understanding shares outstanding and their significance, investors and analysts can make more informed decisions in the world of finance and investing, using real-life examples such as Apple Inc. and Tesla, Inc. as reference points.