What is authorized shares?

Authorized shares represent the number of stock shares that a publicly traded company is legally allowed to sell or issue on financial markets. The article on the establishment of documents that are submitted when a business entity is created in the region is determined by the number of justified shares that can be issued. This amount is not impermeable and can be adjusted by the support of the Board of Directors and joint shareholders.

There are two types of authorized shares: ordinary shares and preferred. Common shares provide investors with the opportunity to vote when the company faces the main decision, such as merger or change of executive lines. Preferred shareholders are not offered votes, but can rely on a permanent stream of income generated from quarterly and annual dividend distributions. Both types of shareholders are interested in the number of justified shares traded by the company.

Stock is sold on public markets as a means of society to obtain capital fromInvestors for some type of growth initiative such as expansion. The company can decide to issue all its authorized shares if it has its initial public offer (IPO), which represents a debut trading session in public markets. The second alternative is to reserve some shares in the Treasury and to release them on public markets on another date.

shares offering subsequent IPO are called secondary or subsequent offer. By reserving authorized IPO shares, the company provides in the future the opportunity to continue to connect to capital markets, even without the support of its shareholders. The reservation shares also provides a defense line to the management team if another company is trying to take enemy takeover, in which case the proceedings can buy more shares to increase its own capital. If all authorized shares were issued on stock markets,The Company can strengthen access to actions by issuing additional legitimate shares, but only if the initiative is approved by its Board of Directors and joint shareholders.

percentage of shares owned by investors shall be diluted when additional stocks are issued on the market; The percentage of possession of equity decreases. As a result, the more authorized shares have access, the more it is possible to dilute the possession, which can be damaging in the short term. However, if further issues of shares lead to greater profitability in the long run, investors may support the initiative.