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If you asked how many shares of Apple (NASDAQ: AAPL) there are, the answer could be 50.4 billion, 16.85 billion, or 16.39 billion.
The question from there is, “Which measure of the number of shares are you using?”
The three measures are authorized shares, outstanding shares, and floating shares.
Authorized shares are the number of shares a company is legally allowed to issue and are not relevant for most investing conversations. Investors do need to concern themselves with the number of shares outstanding vs the number of shares floating.
Outstanding shares include those held by stakeholders and company insiders; floating shares refer to the number of shares available to be traded.
In this article, we’ll break down these two types of shares — shares outstanding vs float — to help you understand the simple difference.
Shares Outstanding vs Float: Why Know the Difference?
Every publicly-traded company has issued shares, some of which are available for trading while others are subject to restrictions.
The public float (also known as “floating shares” or “the float”) represents the shares that are:
- publicly-owned
- unrestricted
- available for trading
Shares outstanding (also known as “outstanding shares”) include the entire public float plus any restricted shares.
There can be large differences between a company’s outstanding shares and the public float, greatly skewing the results of a variety of financial metrics.
Many valuation ratios (which are used to evaluate stocks for investments) use the number of shares in their calculation — it’s important to know which measurement is being used.
Additionally, the larger the gap between outstanding shares and the float, the higher the insider ownership stake.
This can mean one of two things — or both or neither.
1) Insiders, those with the most information about the company, are bullish on the stock and want to own it.
2) The power to influence the stock price, both higher and lower, is in the hands of only a few big players who probably know the most about the company’s prospects.
Next, we’ll take a look at each in-depth.
Shares Outstanding
A company’s number of shares outstanding (outstanding shares) is the total number of shares issued and held by stakeholders, both outside investors and insiders.
This figure includes “closely-held” shares — those owned by corporate management and employees, institutional investors with controlling stakes or seats on the board of directors, or company-owned foundations.
To find the number of shares outstanding, check the “shareholders’ equity” figure on the company’s balance sheet.
Shareholders’ equity will typically provide all three measures of shares:
- authorized
- outstanding
- floating
You can also divide a company’s market capitalization by its share price.
Employee stock options, which are a common form of additional compensation and can be converted to shares, are not included in the tally of outstanding shares.
Floating Shares (the Float)
Floating shares are the number of outstanding shares excluding closely-held shares by company insiders and controlling investors.
The resulting tally shows the number of shares available to be traded by the public.
Floating stock is the most narrow number of a company’s shares.
Shares Outstanding vs Float: FAQs
Next, we’ll take a look at some of the most commonly asked questions associated when discussing shares outstanding vs float.
How are shares outstanding vs float calculated?
Float = Shares Outstanding - Closely Held/Insider Shares
The vast majority of stock listings and equity data providers use outstanding shares in their calculations. We recommend you do the same for consistency.
Frequently, the difference in the number of shares outstanding vs the number of shares in the float is negligible.
The S&P 500, on the other hand, has set a precedent as a free-float index, using the float in its data calculations.
If you use any data provider to make investment decisions, be sure to note which method it uses.
Can the float ever be higher than the number of outstanding shares?
No, the float can never be higher than the number of shares outstanding.
The float only includes the number of shares tradable on financial exchanges, whereas the number of outstanding shares counts the float plus any restricted, closely-held, and insider stock.
What do differences in outstanding shares vs float tell investors?
If the float makes up a large percentage of the total outstanding shares, it means the stock is highly liquid — many shares are available to be traded.
If a company’s floating stock is low compared to its outstanding shares, it means the stock has many closely-held shares.
Large trades by insiders can significantly move the price of the stock, higher or lower.
Most investors prefer stocks with greater liquidity, but a lot of closely-held shares can be a signal of insider bullishness.
The Bottom Line: Shares Outstanding vs Float
When it comes to talking about the number of shares, it’s important to know the difference between shares outstanding vs the float because of how data providers differ in their usage.
If the gap between the shares outstanding and the float is narrow, this is less of a problem. But if the gap between the two is large, investment decisions can be made erroneously.
Furthermore, identifying the number of closely-held shares in relation to the number of publicly-held shares can help you gauge the level of insider confidence and foresee any possible liquidity issues.
Yes, it’s subtle, but knowing the difference in the number of shares outstanding vs the public float can completely change your sentiment towards an investment, changing what you initially thought was a buy into a sell, or vice versa.
