When a company goes public and gets incorporated, they change legal status. Part of it means having lots of meetings and signing more paperwork than most of us see in a lifetime. One of those pieces of paperwork is a charter, which outlines a bunch of rules—including the total number of shares a company can issue. This number of shares is called authorized stock, 'cause it's the total number of shares the company is authorized by its charter to issue.
Example
Let's say Company XXX wants to buy Company Y. Company XXX has an authorized limit of 100 million shares. It currently has 85 million shares and 5 million options, yet unvested, outstanding. Technically it has 90 million shares outstanding. It wants to print shares to buy Company Y. But company Y wants 20% of the primary shares of Company XXX or 17 million shares. Company XXX cannot print the shares to buy Y. Why? Because it needs to get approval to change the charter—doable only by a majority vote of the outstanding shares at the time.
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Finance: What Happens When your Stock Sp...56 Views
Finance allah shmoop shmoop what happens when your stock splits
Well for one thing it's not is embarrassing Is when
your pants split Trust me thie Answer Mohr pie pieces
that's What happens when your stock splits That's it well
here's the pie before the split This pie represents the
dessert company pastry holic synonymous And if you look carefully
with a big fat zoom in microscope while you khun
see ten million slices of this pie that's ten million
shares currently on the market trading that comprise the value
of this entire company Well the stock has done great
It has had a big fat rise in zooming to
one hundred dollars a share valuing the company at a
billion dollars How no that's not magic With the stock
market paying one hundred dollars a share for pastry hollis
anonymous multiplies that hundred dollars by the ten million shares
to get the market capitalization or market value of the
company Yep a cool bill in this case Well the
company wants to split the stock for four for one
to make it easier for less wealthy people toe by
at least one hundred shares And if people buy fewer
than a hundred shares While there's usually much more commission
they pay for not buying what's called around lot so
the company splits the stock for for one and now
instead of ten million tiny slices they have forty million
teeny tiny slices and no that's not by magic For
everyone who had one share before Now they have four
The stock price should fall on the day of the
split from one hundred bucks to twenty five bucks a
share and that's it pastry Hollis anonymous now has forty
million shares outstanding with wall street paying twenty five bucks
a share for them and voila the value of the
company or its market capitalization has not changed it's still
that same cool bill we started out with on ly
Now that cool bill is chopped up into smaller pieces
Wow counting has never made us so hungry for a
nice piece apply Is this gluten free that maybe tax 00:02:05.7 --> [endTime] free You got any tax free pies
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