Stock Shares Aren't Equal

Stock represents an ownership share in a company. Not all shares are created equal. Before making an informed decision, you need to understand the terms that define shares. There are a number of different types of shares out there:

Restricted shares are company stock that are subject to certain restrictions and are not fully transferable until certain conditions have been met. These shares generally have no voting rights, or have restrictions on voting rights.

Authorized shares represent the maximum number of shares that a company is allowed to issue, as specified in its articles of incorporation. However this can be changed and revised upwards with shareholder approval. Generally the company will keep the number of authorized shares higher than those actually sold, and retain shares to use later if it needs to raise additional capital.

Treasury shares are those that have been bought back or reacquired by the issuing company and is available for resale, and thus reducing the number of shares outstanding on the market. Treasury stock has some drawbacks: It does not pay a dividend and has no voting rights.

Float shares refer to the number of shares that are actually available for trade on the stock market. The float is calculated by subtracting the number of restricted shares from the total number of outstanding shares. For example, ABC Company has 10 million outstanding shares, but only 8 million are trading on the open market. Thus, the company's float would be 8 million.

Outstanding shares refer to the number of shares of common stock the company actually issued, which include the restricted shares plus the float.

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