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To: chaz who wrote (7223)	9/29/1999 2:14:00 PM
From: Brian Sullivan	Respond to of 54805

No the authorized shares don't automatically increase with a spilt. An IPO with 1,000,000 authorized shares and 200,000 shares out, would if it spilt 2 for 1 use 200,000 of the remaining 800,000 shares to pay the stock dividend. That is why you often see a 2 for 1 spilt state that it is payable as a stock dividend. The dividend is paid using some or all of the unused authorized shares. After several stock splits several times a company often runs up against the authorized shares limit and then has to then spilt the share subject to shareholder approval to increase the authorized shares limit.

To: chaz who wrote (7223)	9/29/1999 2:27:00 PM
From: Zirdu	Read Replies (1) \| Respond to of 54805

Not quite. If company X has 1,000,000 authorized shares, and then issues 200,000 in an IPO, so that only 200,000 shares are then "issued and outstanding", the total market cap or ownership of the company is divided into 200,000 shares. The company has authority from the shareholders to issue another 800,000 without asking permission, but until such time as they do so, these are not real shares. If the company then has a 2:1 stock split, what is normally done is each of the 200,000 actual shareholders gets one share for each share held, and these additional 200,000 shares are then issued by the company from the 800,000 it is authorized to issue. Then the total market cap and ownership of the company is divided into 400,000 shares total. The company has remaining to it for issuance in the future, 600,000 shares. No dilution of shareholder equity in a stock split such as this. If you owned 10,000 shares before the split, you would own 5% of the total company. After the split you would have 20,000 shares, but this would still amount to 5% of the total company. Now suppose Company X decides to buy company A by a stock swap. It issues 200,000 more of it's authorized but unissued shares to company A'a shareholders for total ownership of Company A. Then total ownership of Company X (which now includes Company A) is divided into 600,000 shares. And Company X has 400,000 shares left authorized for issuance but unissued. This can involve dilution for original company X shareholders, since if you originally owned 1000 shares of Company X, your % of ownership of the total company would go down. If you owned 20,000 shares of company X before they bought company A, you would own 5% of the company. After they bought company A, you would only own 3.33% of the total company. Thus your ownership of the total company would be "diluted." Presumably this might be justified, since you would own a smaller percentage of what would be a bigger entity (company X plus company A). But nonetheless it is called dilution. The total number of shares "asuthorized" for issuance is not that meaningful. It could really be infinite, meaning the board of directors of the company could issue whatever shares were needed from time to time, and nothing would really change.