Why can unissued capital stock exist?












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Unissued capital stock allows a company to issue shares at any given time, diluting the ownership of current shareholders. This does not seem logical nor fair. At any given time, shouldn't 100% of the company be owned by the shareholders? Because by nature of unissued capital stock, not 100% of a company is owned at a given time (unless all unissued capital stock are issued).






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    Unissued capital stock allows a company to issue shares at any given time, diluting the ownership of current shareholders. This does not seem logical nor fair. At any given time, shouldn't 100% of the company be owned by the shareholders? Because by nature of unissued capital stock, not 100% of a company is owned at a given time (unless all unissued capital stock are issued).






    stocks financial-literacy stock-valuation







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      Unissued capital stock allows a company to issue shares at any given time, diluting the ownership of current shareholders. This does not seem logical nor fair. At any given time, shouldn't 100% of the company be owned by the shareholders? Because by nature of unissued capital stock, not 100% of a company is owned at a given time (unless all unissued capital stock are issued).






      stocks financial-literacy stock-valuation







      share|improve this question















      Unissued capital stock allows a company to issue shares at any given time, diluting the ownership of current shareholders. This does not seem logical nor fair. At any given time, shouldn't 100% of the company be owned by the shareholders? Because by nature of unissued capital stock, not 100% of a company is owned at a given time (unless all unissued capital stock are issued).






      stocks financial-literacy stock-valuation




      stocks financial-literacy stock-valuation






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      Dheer

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      Novel Ventures

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          It's not really true to say that having unissued stock means that the company is not 100% owned. It'd be more accurate to say that the unissued shares are assets of the company (and therefore, indirectly, of the current shareholders). The company can issue the stock to others in exchange for something that increases the value of the company by a comparable amount (e.g. cash or work). This makes it a fair trade which should not decrease the value of existing shareholders' stock.



          For example, suppose company X has 10 issued shares of stock and a total of 20 authorized shares, (leaving 10 unissued). The valuation of the company is $10, meaning each owned share is worth $1. Now someone comes and gives the company $1 for a new share of stock. Now the company has an extra dollar it didn't have before so it's now worth $11. There are also now 11 issued shares of stock, so each one is still worth a dollar. The original shareholders have been "diluted" in that they now own a smaller percentage of the company, but due to the increase in the company's value, they're just as well-off as they were before. Company X can do this 9 more times before it's out of authorized shares and needs to ask the shareholders for permission to increase the number.






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            It's not really true to say that having unissued stock means that the company is not 100% owned. It'd be more accurate to say that the unissued shares are assets of the company (and therefore, indirectly, of the current shareholders). The company can issue the stock to others in exchange for something that increases the value of the company by a comparable amount (e.g. cash or work). This makes it a fair trade which should not decrease the value of existing shareholders' stock.



            For example, suppose company X has 10 issued shares of stock and a total of 20 authorized shares, (leaving 10 unissued). The valuation of the company is $10, meaning each owned share is worth $1. Now someone comes and gives the company $1 for a new share of stock. Now the company has an extra dollar it didn't have before so it's now worth $11. There are also now 11 issued shares of stock, so each one is still worth a dollar. The original shareholders have been "diluted" in that they now own a smaller percentage of the company, but due to the increase in the company's value, they're just as well-off as they were before. Company X can do this 9 more times before it's out of authorized shares and needs to ask the shareholders for permission to increase the number.






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              2














              It's not really true to say that having unissued stock means that the company is not 100% owned. It'd be more accurate to say that the unissued shares are assets of the company (and therefore, indirectly, of the current shareholders). The company can issue the stock to others in exchange for something that increases the value of the company by a comparable amount (e.g. cash or work). This makes it a fair trade which should not decrease the value of existing shareholders' stock.



              For example, suppose company X has 10 issued shares of stock and a total of 20 authorized shares, (leaving 10 unissued). The valuation of the company is $10, meaning each owned share is worth $1. Now someone comes and gives the company $1 for a new share of stock. Now the company has an extra dollar it didn't have before so it's now worth $11. There are also now 11 issued shares of stock, so each one is still worth a dollar. The original shareholders have been "diluted" in that they now own a smaller percentage of the company, but due to the increase in the company's value, they're just as well-off as they were before. Company X can do this 9 more times before it's out of authorized shares and needs to ask the shareholders for permission to increase the number.






              share|improve this answer


























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                It's not really true to say that having unissued stock means that the company is not 100% owned. It'd be more accurate to say that the unissued shares are assets of the company (and therefore, indirectly, of the current shareholders). The company can issue the stock to others in exchange for something that increases the value of the company by a comparable amount (e.g. cash or work). This makes it a fair trade which should not decrease the value of existing shareholders' stock.



                For example, suppose company X has 10 issued shares of stock and a total of 20 authorized shares, (leaving 10 unissued). The valuation of the company is $10, meaning each owned share is worth $1. Now someone comes and gives the company $1 for a new share of stock. Now the company has an extra dollar it didn't have before so it's now worth $11. There are also now 11 issued shares of stock, so each one is still worth a dollar. The original shareholders have been "diluted" in that they now own a smaller percentage of the company, but due to the increase in the company's value, they're just as well-off as they were before. Company X can do this 9 more times before it's out of authorized shares and needs to ask the shareholders for permission to increase the number.






                share|improve this answer














                It's not really true to say that having unissued stock means that the company is not 100% owned. It'd be more accurate to say that the unissued shares are assets of the company (and therefore, indirectly, of the current shareholders). The company can issue the stock to others in exchange for something that increases the value of the company by a comparable amount (e.g. cash or work). This makes it a fair trade which should not decrease the value of existing shareholders' stock.



                For example, suppose company X has 10 issued shares of stock and a total of 20 authorized shares, (leaving 10 unissued). The valuation of the company is $10, meaning each owned share is worth $1. Now someone comes and gives the company $1 for a new share of stock. Now the company has an extra dollar it didn't have before so it's now worth $11. There are also now 11 issued shares of stock, so each one is still worth a dollar. The original shareholders have been "diluted" in that they now own a smaller percentage of the company, but due to the increase in the company's value, they're just as well-off as they were before. Company X can do this 9 more times before it's out of authorized shares and needs to ask the shareholders for permission to increase the number.







                share|improve this answer














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                Daniel

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