CandleFocus

Unissued Stock

Candlefocus Editor
Unissued stock is a class of company shares that have not been released onto the market yet by the company. The ideal number of unissued shares depends on the type of issuing company, such as whether it is a start-up or a mature publicly traded company. Unissued stock does not qualify for voting rights for shareholders nor does it generate dividends. Thus, there can be some concern that unissued stock can dilute a company’s earnings per share when these become available.

Unissued stock is not to be confused with treasury stock, which refers to the reacquisition of outstanding shares by the company. These shares are removed from circulation and are not accounted for when calculating the number of unissued shares.

Unissued shares are not necessarily a bad thing. They can be the result of careful corporate planning, such as withholding shares to prevent dilution of control by shareholders. Companies may choose to issue unissued shares when they introduce new product lines, attract new global investors to the company, or they may be issued over time in a incremental fashion.

Unissued stock can also carry tax advantages, as companies may prefer to keep unissued stock rather than liquidate their treasury stock. Unissued stock can also be beneficial from a corporate governance perspective as companies can use them to incentivize the executive team.

Unissued stock is an important factor to consider when analyzing a company’s stock or shares. The number of unissued shares can be calculated by subtracting the outstanding shares plus treasury stock from the total number of authorized shares. It is a useful item to look out for in order to gauge how much power the current shareholders may have in the face of potential dilution of earnings per share.

Glossary Index