Candlestick Trading Blog

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There is an abundance of stock information available on the internet. Your education of the stock market should never end however you must have an understanding of the stock investing basics before you begin to invest your hard earned money. In today’s article we discuss shares and the difference between authorized shares and issued shares. We will also discuss what capitalization means.

When buying stocks and shares you must understand the difference between authorized shares and issued shares. Authorized shares are the total number shares of stock that the board of directors are authorized to sell or “issue” to shareholders. The shareholders determine the number of authorized shares rather than the board of directors, and the directors are not allowed to issue shares without authorization from its shareholders. The board is allowed to issue all of the shares at the same time, or they can issue some now and issue some later. This is why the total number of authorized shares is equal to the total number of shares.

When looking at the stock information for a corporation you must also understand what issued shares are. Issued shares are the maximum number of shares that the board of directors are allowed to give or “issue” to the shareholders and they are the only shares that are counted for ownership purposes. In other words, when buying shares, shares that are “un-issued” still belong to the corporation and they are not taken into consideration when analyzing stock ownership percentages. These stock shares are still considered to be authorized shares and only when they are sold to shareholders are they considered issued shares. In fact, the shareholders are actually responsible for telling the board of directors the number of authorized shares they will allow.

Additional stock information that is important to know about is the term capitalization. Capitalization refers to the amount of money or assets that a company has when operations for that company begin. When investing in stock in a company you should know that there are some states that have a minimum capitalization requirement as a way to pay any potential lawsuits that may arise. They require the corporations to have a minimum number of assets before they begin operating in order to make it a little more difficult to create or begin a corporation.

There is a lot of information regarding stocks and the stock market that every investor must understand before he or she begins investing money. Continue to expand your investment knowledge to avoid making any investing errors that could cost you greatly.