When the public hears of shares being sold on the stock market, they do not normally think of them in anything other than one broad category. In reality, however, shares can come in five different categories which are differentiated according to their purpose. They are, authorised shares, unissued shares, restricted shares, float shares and outstanding shares. It is vital that both new and experienced investors understand the types of stock shares that are on the market, what function they serve and how they should be read in financial ratios. Without this knowledge, investors could be handicapping themselves when making important trades.

Authorised shares

When a company is established, it will allot a certain number of stock shares. This number represents the authorised shares and is a fixed amount until the shareholders hold a vote to determine if the number should be raised. This can be thought of as the grand total number of shares associated with a company, regardless of the share’s secondary designation.

Unissued shares

A company’s goal is to issue as many shares of its stock as possible in order to raise capital for further investment into its infrastructure and development. But the obvious upside to selling its stock does not necessary mean that the company’s best interest lies in doing so. Indeed, if a business has specific uses in mind later on for some of its stock, it will withhold these shares and retain them in its supply. These are known as unissued shares.

Restricted shares

Within the selection of benefits and productivity incentives that employers often extend to their staff, stock options are popular feature. In order to make good on the promise of stock, a company will withhold certain shares that will then be bestowed to their employees.

Float shares

After all the unissued and restricted shares have been doled out and reserved, what remains available on the market are known as float shares. These can be freely traded between investors at any time and without special regulations.

Outstanding shares

Separate from the authorised shares are the outstanding shares. Whereas authorised shares are those which the company starts out with, outstanding shares are what remain after unissued shares have been deducted from the total. In other words, outstanding shares are comprised of every share issued by the company to a stockholder, restricted shares in addition to the float shares.

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