How Many Shares of Stock Should I Issue?

Deciding how many shares to issue during an initial public offering is tricky.

Enough for Trading

Companies want to issue enough shares to satisfy the demand from those who want to trade them. Many stock exchanges mandate that companies issue a certain number of shares before they can be listed on the exchange.

Don't Dilute the Market

If a company issues too many shares, they may become too cheap. This can distort the company's market value. For example, if a company issues so many shares that each share is worth a penny, a price increase of a single cent would suggest that the company has doubled in value.

Bottom Line

Ryan Roberts, a lawyer specializing in technology startups, recommends that a company issue 10 million shares at first. However, the company should not make all of these shares publicly available. A reserve pool of stock should be set aside for the company's founders and top brass, so they may retain control.

References

• Startup Lawyer: How Many Shares Should A Startup Company Authorize at Incorporation?
• All Business: Issuing Stock From Your Corporation
• Active Filings: FAQs - Shares of Stock