What is Unissued Stock?

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Unissued stock are company shares that do not circulate, nor have they been put up for sale to either employees or the general public. As such, companies do not print stock certificates for unissued shares. Unissued shares are normally held in a company's treasury. Their number typically has no bearing on shareholders.

Definition

Unissued stock refers to company shares that have not been sold or circulated among employees or the public. Therefore, the company does not print stock certificates for unissued shares. These shares are typically held in the company's financial treasury and do not usually affect shareholders.

Origin

The concept of unissued stock emerged with the formation of the joint-stock company system. Companies issue stock to raise capital, but not all authorized shares are issued immediately. The existence of unissued stock provides companies with the flexibility to issue more shares in the future as needed.

Categories and Features

Unissued stock can be categorized into two types: authorized unissued stock and treasury unissued stock. Authorized unissued stock refers to shares approved in the company's charter but not yet issued. Treasury unissued stock consists of shares repurchased by the company and not reissued. The main features of unissued stock are that they do not participate in market trading, do not affect existing shareholders' rights, and can be issued by the company to raise funds when needed.

Case Studies

Case 1: Apple Inc. has repurchased shares multiple times throughout its development, turning these repurchased shares into treasury unissued stock, allowing the company to manage its capital structure flexibly when needed. Case 2: Tesla, in its early stages, retained a significant amount of authorized unissued stock to use in future funding rounds, providing the company with crucial financial flexibility.

Common Issues

Investors often misunderstand that unissued stock will dilute existing shareholders' shares. In reality, unissued stock only affects shareholder equity when the company decides to issue them. Additionally, unissued stock does not participate in dividend distribution or voting rights.

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