Term · Governance & Shareholder Structure
Fully Diluted Shares
In briefFully diluted shares are the share count including all potential shares from options, convertible bonds, and subscription rights. It is higher than the shares outstanding and shows the maximum dilution if all instruments are exercised. Per-share metrics are usually lower on a fully diluted basis.
Definition
Fully diluted shares denote the number of shares including all potentially arising shares from options, convertible bonds, subscription rights, and employee programs. It is higher than the number of currently outstanding shares. The metric shows how much existing holdings would be diluted if all instruments were exercised.
How it is calculated
Formula. Fully diluted shares = outstanding shares + shares from options + shares from convertible bonds + other potential shares
Why it matters for small caps
In small caps with a high number of options or convertible bonds, the diluted share count can significantly change the value reported per share. Anyone looking only at the outstanding shares easily overestimates the stake per share.
Common misreadings
- Fully diluted shares are not identical to outstanding shares but rather a calculated maximum assuming full exercise of all instruments.
In the process
Frequently asked
How do fully diluted shares differ from outstanding shares?
Outstanding shares are the securities actually issued. Fully diluted shares add potential shares from options, convertible instruments, and similar rights, thus showing the possible maximum.
Why is the fully diluted basis relevant for valuations?
Metrics such as earnings or equity per share come out lower on a fully diluted basis. This prevents the per-share value from being overestimated.
Which instruments are included in the calculation?
Typically stock options, convertible and warrant bonds, outstanding subscription rights, and committed employee shares, provided their exercise is probable or contractually possible.
Related terms
Sources
Primary
IFRS Foundation (IAS 33)
https://www.ifrs.org/issued-standards/list-of-standards/ias-33-earnings-per-share/
https://www.ifrs.org/issued-standards/list-of-standards/ias-33-earnings-per-share/
Education only, not investment advice. Ranges and thresholds are didactic orientation values, not an official standard.