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Image source: TD Ameritrade. When issued stock is bought back by a corporation, it is deposited in the corporation's treasury and is not considered outstanding. So-called "treasury stock" has no voting rights and doesn't pay dividends, but it can be re-issued by selling it for cash at par value or at a formal valuation price, or it can be granted to employees. Regulations on treasury stock vary from state to state. Victoria Duff specializes in entrepreneurial subjects, drawing on her experience as an acclaimed start-up facilitator, venture catalyst and investor relations manager.
Since she has written many articles for e-zines and was a regular columnist for "Digital Coast Reporter" and "Developments Magazine. By Victoria Duff. Authorized Stock The articles of incorporation are a description of the details of the corporation, including the legal name, address, registered agent, officers, directors, and stated purpose. Issued Stock Stock in a privately held corporation is commonly issued to founders and investors, and offered as part of the compensation for employees.
Next, the company issues shares. This "issued" stock can be less than the total authorized, but it can never be more.
The board, after all, only greenlighted the authorized amount. At this point, the "issued" and "outstanding" stock are equal. Company management or investors own all of the issued stock. Helpful Fool Company's board has elected to issue just 2, shares at this time. Therefore, the company currently has authorized 5, shares and has 2, shares issued and outstanding. Many companies elect to buy back shares as part of their capital-allocation strategy.
When a company buys back its own shares, that stock is accounted for as "treasury stock" on the company's balance sheet. Treasury stock is no longer outstanding -- the company itself now owns it, not an investor or employee -- but that stock has still been issued.
Let's say that Helpful Fool Company has bought back shares in this year's buyback program. The company now has 5, authorized shares, 2, issued, in treasury stock, and 1, outstanding.
The outstanding stock is equal to the issued stock minus the treasury stock. Thanks to the SEC, common stock outstanding is very easy to calculate All companies are required to report their common stock outstanding on their balance sheet. The easiest way to calculate the number is to simply look it up. Do that by navigating to the company's investor-relations webpage, find its financial reporting, and opening up its most recent Q or K filing.
The same can be done on the SEC's website as well. From there, simply scroll down until you find the section in the Q or K called "Capital Stock.
You'll see the various other stock categories I've discussed, so don't let that confuse you. One possible point of confusion we haven't yet mentioned is stock given to employees as compensation, typically in some combination of restricted stock, options, or equity grants.
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