| Not all shares of stock are equal. There are | | | | shares. They hold 20 shares as treasury |
| several different types of shares out there. | | | | shares. There are 10 restricted shares of the |
| When looking to invest, it is necessary that | | | | company. The float is 70 (100-20-10= 70). The |
| you have the complete picture in view. Before | | | | outstanding share amount is 80 (10+70=80). |
| you can make an informed investment decision, | | | | |
| you need to know the terms that define | | | | When you look at the relationship of treasury |
| shares. | | | | shares and restricted shares to the float |
| | | | shares, you see where the controlling |
| Authorized shares represent the total number | | | | interest of the company resides. There are |
| of shares of stock that were authorized when | | | | many companies that retain a large percentage |
| the company was created. The number of shares | | | | of the authorized shares in treasury shares |
| can only be increased through a vote by the | | | | and in restricted shares. |
| shareholders. Although the shares were | | | | |
| authorized, that does not mean that they were | | | | By doing this, they are making sure that they |
| all issued to the public. | | | | can't be taken over by another company. They |
| | | | can also issue this stock in the future as a |
| Some companies will retain shares to use | | | | way to raise funds. |
| later. These are called treasury shares. You | | | | |
| may see a company release treasury shares | | | | If the float of a company is quite small and |
| onto the market in order to bring in money | | | | yet the stock attracts many investors, it can |
| for a project, expansion or research. | | | | often become volatile due to the imbalance |
| | | | between the supply and the demand. The stock |
| Restricted shares are company stock used for | | | | will go up, become overpriced and then fall |
| employee incentives and compensation plans. | | | | quickly in many cases. |
| Restricted stockowners will need the | | | | |
| permission of the SEC to sell their shares. | | | | By watching restricted shareholders, you can |
| After a company first goes public, there is a | | | | get a lot of information about a company. You |
| waiting period in which the insiders' | | | | can visit insider trading sites that let you |
| restricted stock is frozen. No matter how | | | | know the planned or recent sales by insiders |
| established the company is, all insiders must | | | | and major stockholders. You can often get a |
| file with the SEC before they sell their | | | | feel for the company through watching what |
| restricted stock. | | | | they are doing. |
| | | | |
| Float shares are the number of shares that | | | | By understanding the various types of shares, |
| are actually available for trade on the open | | | | you will have a better insight to the company |
| market. Anyone can purchase these shares. The | | | | itself. All stocks aren't created equal. Make |
| outstanding shares are all of the shares | | | | sure you know where the control lies in a |
| issued by the company, including the | | | | company. It can tell you a lot about where a |
| restricted shares and the float shares. | | | | company is going. By understanding shares, |
| | | | you find that you are prepared to analyze |
| For example, if company authorizes 100 | | | | companies. |