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 is Common Stock?379 Views
Finance a la shmoop what is common stock well, common stock
simply put is ownership common stock ownership is a foundation of what [Businesssmen and women in a meeting fighting for control]
comprises control in a corporation it's the common stock that elects the board
of directors who then hires the CEO who then you know hires everyone else so [The organizational chart of a corporation]
yeah when someone owns a share they own a teeny tiny piece of a company the more
shares they own well the more of a voice they have in the management of that [Company building crumbles to the floor]
company so someone who has 51% of the shares in a company will actually have a
lot to say in the election of a Board of Directors for example where someone with [Member of the board with 51% shouting orders at other members]
the small percentage of shares still has a voice but it's a small squeaky one in
a bankruptcy situation common stock sits at the very bottom of the stack of
priorities in being paid back a company that's going bankrupt will start by [Examples of priority stack with IRS obligations first]
paying any IRS obligations, yeah the IRS always wins then they'll pay
employees their salaries and they'll pay any vendors who are owed money then
they'll pay off bank loans and they'll pay back preferred stock and finally at
the very bottom there if there are a few nickels and dimes left over they'll pay [Man emptying nickels and dimes from jean pocket]
common stockholders back but shares you hear quoted from Apple and Amazon and
bathmats are us are all just common stock being traded on NASDAQ or the New [Apple, Amazon and Bathmats R Us stock prices displayed on NASDAQ screens]
York Stock Exchange or other places which are owned by millions and millions
of common and uncommon people [A strange person wearing shoes for gloves in a busy office]
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