The impact of high outstanding shares can be multifaceted, and whether they are "good" or "bad" depends on the context and the investor's perspective. Here are key points to consider:
- Market Capitalization: A higher number of outstanding shares generally indicates a larger market capitalization, which can be attractive to some investors looking for established companies1.
- Dilution of Ownership: When a company issues new shares, the ownership of existing shareholders is diluted. This can be a concern if the company's growth prospects do not justify the dilution2.
- Stock Volatility: More outstanding shares can lead to greater liquidity, which can in turn increase stock volatility. This may be desirable for some investors looking for active markets3.
- Investment in Growth: High outstanding shares can sometimes indicate a company is investing in growth opportunities, which may be viewed positively by investors4.
- Earnings Per Share (EPS): A higher number of outstanding shares can lower EPS if the company's net income remains constant. This can make the stock appear less attractive on an EPS basis2.
- Future Prospects: The growth potential of a company with high outstanding shares depends on factors such as its financial management, industry dynamics, and market conditions.
In conclusion, high outstanding shares are not inherently "good" or "bad." They can be a double-edged sword, providing greater market capitalization and liquidity but also diluting ownership and potentially lowering EPS. Investors should consider the company's growth prospects, financial health, and industry context when evaluating high outstanding shares.