The way I understand it, corporations have 1) authorized, 2) issued and 3) outstanding shares of capital stock. The "authorized" amount is the maximum amount of shares a company is authorized to issue as stipulated in the certificate of incorporation. In GGNC's case, assuming the IR people are correct, it would be 100,000,000 shares. That amount is immaterial, because the corporation's certificate of incorporation can be amended to increase the "authorized" amount any time. The "issued" amount, which usually is also the "outstanding" amount, is that portion of the authorized shares which have actually been issued. A company may of course buy back its own stock and cancel the certificates or hold them in treasury for future transactions if they so desire, thus affecting the outstanding amount.
I wouldn't worry much about the authorized amount. In fact that could be good. For example, if the price of the stock goes up, the company may sell additional shares to the public at market value to raise cash, if necessary. There is nothing wrong with that. On the contrary, the stockholders at that time would benefit from the premium paid for the newly issued stock.
What we longs should be concerned about is the amount of options that are outstanding or that may be issued from time to time. Those are the future stockholders that we don't want because they dilute earnings but contribute little cash to the pot when they exercise. For this, among many other reasons, is that having GGNC become a fully reporting company is very important. On the other hand, holders of options have an interest in having the company's stock price increase because they benefit from that. Usually, option holders are employees that are not paid much salary in exchange for cheap options that increase the potential for a significantly higher payout in the future.
C. Carlos |
