Learn to Watch the Money in all its Forms
Share Dilution
Issued shares are the number of shares held by all the shareholders, regardless if they are individual investors, institutional shareholders, or insiders. Often a corporation will issue more shares to raise capital. Think about what this does to the worth of your shares. You own 1% of all the shares of company xyz. Then the corporation decides to issue 5% more shares to insiders for compensation. When they do this they spread the wealth over 5% more shares. You now own 0.95% of the company. When corporations do this and you don’t agree with their reasoning they are taking your equity away. This can become a dangerous proposition to your nest egg. Stocks may plod along for awhile but eventually the dilution will be noticed and your money may leave you.
Share dilution can be good if you feel the stock price is temporarily overpriced. Then the company is raising capital at what you feel is a good deal. Though, I feel if you feel the company is overpriced don’t wait for dilution just sell some or all of your shares.
Stock Buyback
Stock buyback is on the other side of the coin from share dilution. A company may purchase back stock if it feels the stock price is too low or wants to put to work some of its idle cash. This is like a secret dividend! How so? If you own 1% of a company and they buyback 5% of the issued shares you will now own 1.052% of the company. If the dividend was set a $1,000,000 you would of recieved $10,000 before, but after the buyback you’ll receive $10,520. Share buyback can be good. Owning stock in companies that consistently do stock buybacks can be really good over the long term.
So remember, if you’re investing in a stock for a long term, keep an eye on those issued shares. Some companies might be diluting your value one stock issuing at a time.
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Related posts:
- Float – Authorized – Outstanding Shares – Oh My!
- Dividend
- Dividend Yield Definition and Ex Dividend Definition
- Working Out Which Shares Are Right For You
- Sale on Shares!
« DOW Up! Sell Now? Wait for More? The Market is Fun Again! Stock Price Gap »
Issued shares include the stock that a company sells publicly in order to generate capital and the stock given to insiders as part of their compensation packages. Unlike shares that are held as treasury stock, shares that have been retired are not included in this figure. The amount of issued shares can be all or part of the total amount of authorized shares of a corporation.
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geovani
Internet Marketing
Thanks for the clarification Geovani between the terms. Sometimes people can use them interchangably.
Have a great day!
-Bill
thank you for your website , i like to learn more
my question is : sometimes , looking at a stock in yahoo finance , i notice that they show institutions owing 110% or 120%
can you explain this ?????
how is it possible to own more than 100 %
and what is it ???? can you explain more about the float ????
i am confused and lost
thank you
thierry
Thierry,
Thanks for the posting motivation! Read my post based on your question. Float, Authorized, Outstanding Shares Oh MY!
Thanks you,
Bill