Agraflora Ventures Ltd (AGRA)

[Billy055]

Reverse stock splits don't affect the number of authorized shares, but a forward stock split issues new stock from the company's authorized shares. When new shares are issued by a company, it adds to the number of outstanding shares and reduces each shareholder's percentage of ownership in the company. This is called dilution, and it reduces the value of each share. Authorized shares represent a potential for stock dilution.

Authorized Shares
When a company incorporates, among the things the owners of the company decide is how many shares to authorize. Authorized shares are the total number of shares of each class of stock that the company has available to issue. If company management wants to increase the number of authorized shares, it must obtain the approval of the shareholders via a formal vote. Stock splits affect only the issued and outstanding stock -- the authorized shares don't split.

Forward Splits
The board of directors decides when to dip into the authorized shares to issue new stock, and when those shares are issued, they are called issued and outstanding stock. A forward stock split increases the total number of shares issued and outstanding. For example, when the company conducts a 2-for-1 forward split, it doubles its issued shares, taking those additional shares out of the amount of authorized shares.