Stock Market Terminology

For you and any other investor you need to know certain terms to be able to make informed choices. Not all shares match up in equality with some different kinds of shares being more worthwhile than others. The terms that are about to be explained will be seen and used in financial ratios. There are authorized, restricted, float, outstanding and unissued shares all different from the other.

 Authorized Shares- These shares represent the total number of shares authorized to be issued when the company was created. Only a vote by the shareholders can increase this number of shares. However, just because a company authorizes a specific number of shares to be issued doesn’t mean that all of these shares will be issued to the public. A large percentage of companies tend to retain shares for use later on in the company’s lifetime which is referred to as unissued shares.

Unissued shares- These are the kinds of shares that are saved within a company’s treasury. Unissued shares are NOT issued to the public or to employees of said company.

Float shares- The float is the kind of shares you’ll be buying and have access to. The float is the number of shares that are being traded in the open market. 

Restricted Shares- Owning restricted shares means you’re inside the company and are likely an employee for said company. Meaning that there are strict regulations to follow when handling said shares. Companies tend to use these shares as an incentive for employees and compensation plans. Before I go any further though I should describe what the SEC is.

 SEC- The SEC is a federal agency responsible for regulating the securities industry and enforcing federal securities law. it is meant to protect the public against fraudulent and manipulative practices in the securities market. The SEC is an acronym that stands for The Securities and Exchange Commission. 

Restricted Shares Part 2- Owners of Restricted shares need the permission of the SEC to sell those shares. When a company first goes public, insiders who own restricted shares have those frozen for a waiting period. Insiders who want to sell their shares, must file a form with the SEC declaring their intention. There is no exception even insiders of established companies must file with the SEC before selling.

Outstanding Shares: This is the number of restricted shares plus the float. Outstanding shares are the shares issued by the company.