Day33. Financial term | Shares outstanding

Shares outstanding refer to the number of company's issued shares that are actively traded in the market.

It is a crucial financial indicator, and understanding the shares outstanding of a company can assist investors in making more informed investment decisions.

Firstly, the size of shares outstanding can impact the company's share price. When the shares outstanding are relatively low, there is less trading volume, making the share price more susceptible to fluctuations based on investors' buying and selling activities.

Conversely, when the shares outstanding are higher, there is greater trading volume, resulting in relatively smaller price fluctuations.

Secondly, investors can assess the liquidity of a company's share by understanding the shares outstanding. If the shares outstanding are higher, investors can more easily find trading counterparts and enjoy greater convenience in buying and selling shares.

On the other hand, if the shares outstanding are lower, investors may encounter issues with limited liquidity when buying and selling shares, which can impact their investment returns.

Additionally, understanding the shares outstanding can help investors evaluate the market value of a company.

The market value of a company is calculated by multiplying the share price by the number of shares outstanding. Therefore, as the number of shares outstanding increases, the market value of the company also increases accordingly.

It is important to note that if a listed company suddenly announces an increase in the issuance of shares, it may not always be a positive development.

For example:

Let's assume Company A has issued 1 million shares, with 500,000 shares held by major shareholders and another 500,000 shares actively traded in the market.

If Company A suddenly announces the issuance of an additional 1 million shares, the shares outstanding would become 1.5 million, resulting in a decreased market share percentage for each share and potentially impacting the share price.

Therefore, understanding the quantity and trends of shares outstanding for a company is crucial for making sound investment decisions.