What Is Unissued Stock?
Let me explain unissued stock directly to you: it represents shares a company is allowed to issue but hasn't yet offered to employees or other investors. These shares stay inactive; they aren't released or available for purchase. That's why companies don't print stock certificates for them. Typically, I see unissued shares held in a company's treasury, and their number usually doesn't affect current shareholders.
Key Takeaways
Understand this: unissued stock is a category of company shares that aren't circulating or for sale on the market. You can figure out the number by subtracting outstanding shares plus treasury stock from the total authorized shares. These shares don't matter much to current stockholders because they don't get voting rights or dividends. However, they signal potential events that could dilute a company's earnings per share.
Understanding Unissued Stock
When a company goes public, it authorizes a specific number of shares in its charter or articles of incorporation—these are called authorized stock. This includes all created shares: those sold to investors and issued to employees (outstanding stock) and those not up for sale (unissued shares). Companies don't bother printing certificates for unissued stock; they just hold them in the treasury.
To calculate unissued shares, take the total authorized shares and subtract the outstanding shares plus treasury stock. Treasury stock, by the way, are shares the company has repurchased.
For stockholders, unissued shares aren't relevant right now—they don't vote or earn dividends. But watch out: they could dilute your ownership and share value if the company decides to issue more stock later.
Important Note on Dilution
Here's something crucial: unissued stock could dilute existing shareholder value if the company releases more stock in the future. Analysts and investors like you should monitor a company's plans for issuing these shares closely. Plans involving new issuances might dilute earnings per share (EPS).
That said, unissued shares aren't factored into fully diluted EPS calculations, though those do account for convertible securities and unexercised stock options.
Unissued Stock vs. Treasury Shares
Don't confuse unissued stock with treasury stock. Treasury stock are shares that were issued and sold but then repurchased by the company. The distinction can blur, though, as some companies list treasury shares as unissued.
Companies with charters allowing a large number of shares do this for flexibility in future sales. For instance, a company might note in its financial statements that it's authorized to issue 10 million shares, but only a portion are issued and outstanding.
A Real Example
Take Dollar Tree (DLTR) as an example from their 2016 8-K filing with the SEC: 'Shares purchased under the share repurchase authorizations are generally held in treasury or are canceled and returned to the status of authorized but unissued shares.' This shows how companies handle these shares in practice.
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