PostHeaderIcon Understanding Stock Share Terms

Aside from common and preferred shares, there are also other important share terms that investors need to know about and understand. These share terms are important to understand especially how they are related to each other. Here are some of the important share terms that stock owners, new and old, should know about and understand.

Authorized Shares

The term "authorized share" refers to the maximum number of shares that a company can issue. The number of authorized shares is initially specified in the company’s articles of association but can also be changed through the approval of its majority shareholders. The total authorized shares usually are composed of issued shares plus the unissued shares. That is why all authorized shares are not necessarily being issued for trading in the market.

Unissued Shares

Unissued shares are shares that are usually reserved by the company and retained in its treasury. These shares are not included in the restricted shares reserved for employees and issued shares that are traded in public.

Restricted Shares

Restricted shares or restricted securities refer to shares in a company that are usually offered as compensation of benefit to employees of the company. This type of stock is not readily traded or transferable until certain conditions are met. Selling restricted stock usually requires the permission from the Securities and Exchange Commission. The main reason why such shares have this restriction is to prevent employees in the company who own such shares to engage in insider trading.

Float Shares

Float shares refer to the shares that are made available for trading in the open market. These types of shares are the ones that traders can openly buy and sell.

Outstanding Shares

Outstanding shares refer to common shares that have been authorized, issued and bought by investors. Those who hold such shares have the voting rights as well as represent part ownership in a corporation.


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