Unissued shares are authorized but not yet released by a corporation. They may be held for various reasons, such as waiting for demand to grow before releasing them to the market. Corporations may also set a schedule for releasing unissued shares to increase investor interest.
Unissued shares are any type of shares authorized for issuance by a given corporation, but for some reason have not been released. While valid shares of stock are accounted for in the company’s bylaws, the shares remain without exchange for money or services of any kind. This is in contrast to issued stock, which has been released for sale and is currently in circulation.
All corporations that wish to issue shares at some point will include provisions within their bylaws that cover this possibility. Specific details regarding the maximum number of shares of each class or type of shares that the company may issue will be included in the details of the letter. The company is not required to issue the maximum number of shares at any given time, nor is it necessary to place all authorized shares in general circulation. Many corporations choose to retain a certain number of unissued shares for different reasons.
In some cases, a corporation may choose to hold onto unissued shares while waiting for demand for the company’s stock offering to grow among investors. Once the demand reaches a certain level, the corporation may choose to release all or a portion of the unissued stock, taking advantage of the higher prices that the now-desirable stock is commanding. The end result for the company is an infusion of proceeds from the sale of additional shares that were not on the open market a short time ago, without the need to obtain shareholder and board member approval to issue more shares.
At other times, a corporation may choose to set a schedule for delivering unissued shares to the open market. When this is the case, the corporation may choose to offer the unissued shares in specified increments over a period of time. This action can be used when the company wants to use the stock offering as a proactive mechanism to increase interest among investors, rather than releasing unissued shares in response to interest generated by other means.
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