Not all shares of stock are equal.

Authorized shares represent the total number of shares of stock that were authorized when the company was created.

Restricted shares are company stock used for employee incentives and compensation plans. After a company first goes public, there is a waiting period in which the insiders’ restricted stock is frozen. No matter how established the company is, all insiders must file with the SEC before they sell their restricted stock.

Anyone can purchase these shares. The outstanding shares are all of the shares issued by the company, including the restricted shares and the float shares.

For example, if company authorizes 100 shares. They hold 20 shares as treasury shares. There are 10 restricted shares of the company. There are many companies that retain a large percentage of the authorized shares in treasury shares and in restricted shares.

Stock Shares Aren’t Equal

Most people own stock.

A beauty contest is financial jargon for the courtship process that takes place as a company selects an investment bank to perform a transaction such as an initial public offering.

Once the investment banks are chosen for the initial public offering, due diligence begins. An organizational meeting is held at company headquarters that usually consists of company management (CEO, CFO), the company’s attorneys, the company’s accountants, the lead manager, the co-manager and the attorneys representing the managers.

A company that seeks to go public must have an S-1 registration statement, or prospectus. The prospectus is the legal document used to market the offering to investors. The preliminary prospectus is also printed without an offering price as the offering price will be determined after the syndicate has built a book for the offering.

On trading day, shares are sold by each investment bank in the syndicate to investors.

Shares then immediately begin trading publicly as investors sell their shares to new investors — and a stock is born.