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Ken's Mailbag Q&A - Shares outstanding totals explained
Kenneth J. Gruneisen, Founder and Contributing Writer, www.CANSLIM.net
CANSLIM.net


 

Subscriber Questions:

December  23, 2011

Dear Ken,

I have been watching LULU and I dont understand what shares outstanding really means I know its an important varible when it comes to supply, but the CANSLIM screen notes 71M shares outstanding, but in parenthesis it identifies 52M Whats the difference? Is the second number the real supply amount? Thanks. Andy

 
Ken's Response:

 January 5, 2011

Dear Andy,

Thanks for bringing up Shares Outstanding, which concerns the S criteria of the fact-based system! 

Below is the definition provided by dailygraphs.com concerning Shares Outstanding as they display it and you see in the annotated graphs we include in CANSLIM.net's reports available to those like you with a membership UPGRADE. (Thanks!)

Shares Outstanding

The number of shares issued for trade in the open market. The figure includes restricted shares held by corporate officers and insiders, but does not include shares repurchased by the company.

In the situation where a company has more one class of common stock, we will modify the display to reflect two sets of numbers. The first number is a summation of all common share classes. The number which follows in parentheses represents the number of common shares for the primary class.

Example: “Shares Outstanding 250 Mil(150 Mil)”

250 Mil = Summation of shares in all common stock classes;
(150 Mil) = Number of primary class common shares

The difference between the two figures represents the secondary class(es) of common stock.

Float is really what defines current "supply" of shares in public circulation, as my annotation on the attached weekly graph for LULU shows. Large positions held by Insiders or Institutional investors may sometimes be subject to lock-up periods based on securities industry regulations designed to keep companies from issuing new shares and then having those who bought the new shares dump them on the market and unfairly dilute the value of shares already out in circulation. 



Even when the restriction on those Outstanding shares is lifted, Insiders still are subject to limits on how much they can legally sell in a certain period of time. Usually they care about preserving shareholder value due to the size of their holdings, and it is typical for them to get the help of an underwriting broker/dealer firm to place a Secondary Offering when time has passed and they can lift the restriction. 

With all obvious concerns about the damaging effects of dilution considered, the upshot on Secondary Offerings is that when they are completed the end result is typically an increase in the total number of institutional owners. Institutional owners are often supportive of their existing positions and will even accumulate more shares when they consolidate near classic support levels like the 50 and 200 DMA lines, if they are still believers in the company. If too many become pessimistic and decide to unload, this is what ends up sending the stocks slicing through support 
Please let me know if there is any way I can be more helpful to you in your efforts.

Best regards,

Kenneth J. Gruneisen
Founder & Contributing Writer for CANSLIM.net
www.canslim.net

About Kenneth J. Gruneisen, Founder and Contributing Writer, www.CANSLIM.net :
Kenneth J. Gruneisen has successfully completed the CAN SLIM® Certification Program.  Mr. Gruneisen became a Registered Representative in 1987 and his career includes experience offering personalized assistance to investors with more than a decade of experience as a Registered Principal managing a branch office.

The recommendations made by CAN SLIM® certified individuals are their own and may not be attributed to the CAN SLIM® Certification Program, William O'Neil & Co., Investor's Business Daily or their affiliates. The CAN SLIM® Certification indicates only that the individual has successfully completed the CAN SLIM® Certification Program. CAN SLIM®, William O'Neil & Co., Investor's Business Daily and any of their affiliates are in no way responsible for any loss or damage caused as a result of the services provided by these individuals.


Comments contained in the body of this report are technical opinions only and are not necessarily those of Gruneisen Growth Corp. The material herein has been obtained from sources believed to be reliable and accurate, however, its accuracy and completeness cannot be guaranteed. Our firm, employees, and customers may effect transactions, including transactions contrary to any recommendation herein, or have positions in the securities mentioned herein or options with respect thereto. Any recommendation contained in this report may not be suitable for all investors and it is not to be deemed an offer or solicitation on our part with respect to the purchase or sale of any securities.

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The recommendations made by CAN SLIM® Certified individuals are their own and may not be attributed to the CAN SLIM® Certification Program, William O'Neil + Co., Investor's Business Daily or their affiliates. The CAN SLIM® Certification indicates only that the individual has successfully completed the CAN SLIM® Certification Program. CAN SLIM®, William O'Neil + Co., Investor's Business Daily and any of their affiliates are in no way responsible for any loss or damage caused as a result of the services provided by these individuals.

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