AuthorTopic: Authorized Issued Outstanding Restricted Shares
@2014-09-12 08:38:15
I have read definitions in the CFA institute notes, notes and on the internet. I am still in want of clarity.

Letz say there is a start up who has a founding owner. The founding owner owns the entire company.Two years later, 3 other investors join the company. SO now there are 4 investors. Letz say each of them own 25% of the company (donno on wat basis this is decided in reality). Now, they want more capital, hence they go through an IPO. They raise 5 million dollars through the sale of 500,000 shares, thereby forgoing 20% of their stake in the company(again donno how 20% is arrived at, may be the Face value of share).

1. So what is the number of authorized shares, issued shares and outstanding shares in this context ?
2. Do these terms include the portion of shares held by founding owner and other early institutional investors or do they talk only about shares in the context of public investors ?
3. What is restricted shares ? It is part of outstanding / issues ?
4. Also after the IPO (assuming there are no selling shareholders), does each of the existing shareholders (founder and initial investors) go down by the same amount(5%), or is there something else to it ?
5. Are preferred shares also issued through IPO ? Is it held only by insiders like early investors and founders or also by public?

CFA Discussion Topic: Authorized Issued Outstanding Restricted Shares

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I was very pleased with your notes and question bank. I especially like the mock exams because it helped to pull everything together.
Martin Rockenfeldt

Martin Rockenfeldt