Unissued stock is shares in a company that have been authorized for use, but which have never been issued. These shares cannot be used to cast votes in shareholder elections, nor are they entitled to receive dividends. The number of unissued shares is generally irrelevant to current shareholders, but could be a concern in the following two situations:
- A large number of unissued shares indicates that the board of directors could potentially sell or otherwise issue a large number of additional shares without prior investor approval. Doing so could drastically reduce earnings per share.
- A small number of unissued shares limits the ability of the board of directors to sell more shares, or to declare a stock dividend or stock split.
To calculate the amount of unissued stock, subtract the total number of shares outstanding from the total number of authorized shares, and also subtract the number of shares of treasury stock. For example, a business has 1,000,000 authorized shares, 100,000 shares outstanding, and 10,000 shares of treasury stock. The unissued stock is calculated as follows:
1,000,000 Authorized shares - 100,000 Shares outstanding - 10,000 Treasury shares
= 890,000 Unissued shares
Unissued stock has never even been printed on a stock certificate. It is more of a theoretical number of shares that could be issued, rather than an actual legal document.
Unissued stock is not the same as treasury stock. Treasury stock is shares that have been bought back from investors.