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Replies to post #27711 on Vision Industries Corp. (fka VIICQ)
www.sec.gov/Archives/edgar/data/1405424/000117337514000195/def14aavision071514.htm
"Our Articles of Incorporation currently authorize the issuance of up to 500 million shares of capital stock comprised of 498 million shares of Common Stock, as well as 2 million shares of preferred stock. If approved, this proposal would amend our Articles of Incorporation to increase the authorized shares of Common Stock to 9.998 Billion shares and leave the number of authorized shares of preferred stock unchanged. This proposal will have no impact on our currently outstanding shares."
Below, VIIC file shows multiple Lenders converted their loans to Common Shares. Very interesting.
http://www.sec.gov/Archives/edgar/data/1405424/000117337514000222/R14.htm
Authorized Shares
Authorized shares refer to the largest number of shares that a single corporation can issue. The number of authorized shares per company is assessed at the company's creation and can only be increased or decreased through shareholders' vote. If at the time of incorporation the documents state that 100 shares are authorized, then only 100 shares can be issued.
But just because a company can issue a certain number of shares doesn't mean it will issue all of them to the public. Typically companies will, for many reasons, keep a portion of the shares in their own treasury. For example, company XYZ may decide to maintain a controlling interest within the treasury just to ward off any hostile takeover bids. On the other hand, the company may have shares handy in case it wants to sell them for excess cash (rather than borrowing). This tendency of a company to reserve some of its authorized shares leads us to the next important and related term: outstanding shares.
Outstanding Shares
Not to be confused with authorized shares, outstanding shares refer to the number of stocks that a company actually has issued. This number represents all the shares that can be bought and sold by the public, as well as all the restricted shares that require special permission before being transacted. As we already explained, shares that can be freely bought and sold by public investors are called the float. This value changes depending on whether the company wishes to repurchase shares from the market or sell out more of its authorized shares from within its treasury.
Let's look back at our company XYZ. From the previous example, we know that this company has 1,000 authorized shares. If it offered 300 shares in an IPO, gave 150 to the executives and retained 550 in the treasury, then the number of shares outstanding would be 450 shares (300 float shares + 150 restricted shares). If after a couple years XYZ was doing extremely well and wanted to buy back 100 shares from the market, the number of outstanding shares would fall to 350, the number of treasury shares would increase to 650 and the float would fall to 200 shares since the buyback was done through the market (300 – 100).
Hold on a minute, though - this is not the only way the number of outstanding shares can fluctuate. In addition to the stocks they issue to investors and executives, many companies offer stock options and warrants. These are instruments that give the holder a right to purchase more stock from the company's treasury. Every time one of these instruments is activated, the float and shares outstanding increase while the number of treasury stocks decrease. For example, suppose XYZ issues 100 warrants. If all these warrants are activated, then XYZ will have to sell 100 shares from its treasury to the warrant holders. Thus, by following the most recent example, where the number of outstanding shares is 350 and treasury shares total 650, exercising all the warrants would change the numbers to 450 and 550, respectively, and the float would increase to 300. This effect is known as dilution.
The Bottom Line
Because the difference between the number of authorized and outstanding shares can be so large, it's important that you realize what they are and which figures the company is using. Different ratios may use the basic number of outstanding shares while others may use the diluted version. This can affect the numbers significantly and possibly change your attitude toward a particular investment. Furthermore, by identifying the number of restricted shares versus the number of shares in the float, investors can gauge the level of ownership and autonomy that insiders have within the company. All these scenarios are important for investors to understand before they make a decision to buy or sell.
