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Authorized shares
Also called: authorized capital, authorized share count, share authorization
The maximum number of shares a company’s charter allows it to issue; issuing more requires shareholders to approve a charter amendment.
Explanation
Every corporation’s charter (its certificate or articles of incorporation) sets how many shares it may issue. Shares outstanding, plus shares reserved for warrants, options and convertibles, must fit under that number. The difference is the room management has to issue new stock without asking shareholders.
When the room runs out, the company must hold a vote to amend its charter, usually through a proxy statement (DEF 14A) that asks to increase authorized shares, often next to a reverse split proposal. A reverse split that leaves authorized shares unchanged multiplies the headroom: after a 1-for-10 split, the same authorization covers ten times as many shares relative to the smaller count.
Charter amendments are reported on Form 8-K Item 5.03, and the authorized and outstanding counts appear on the balance sheet or in the equity note of every 10-Q and 10-K.
Why it matters
A request to increase authorized shares is a company telling you it plans to issue more stock. A company with no headroom left cannot sell shares until shareholders vote.
How Equity Dictionary measures it
Authorized shares are not scored directly. Proxy statements and 8-K Item 5.03 amendments appear in the Filings tab, and the issuance that follows shows up in the split-adjusted share count and the historical-dilution factor.
Related terms
- Reverse stock split: Combining existing shares into fewer, higher-priced ones, for example 1-for-10, usually to lift the share price back above an exchange minimum.
- Dilution: The shrinking of each existing shareholder’s ownership stake when a company issues new shares.
- Toxic financing: Convertible securities whose conversion price floats with the market, so the lower the stock falls, the more shares the holder receives.
- Overhang: Shares that could be added to the market from warrants, options, convertibles and unvested stock awards, which tends to weigh on the share price.
- Form 8-K: The current report a company must file within four business days of a major event, organized into numbered items.
Plain-English summary for research; not legal or investment advice.