Hello readers ! Today we would like to go over a very important factor in the volatility of penny stocks. The share structure of a stock should be one of the very first things one should look at before considering their decision to trade a certain stock. Share structures affect volatility and liquidity, and today you will find out the general parts of what information a share structure can infer. We will work our way down from largest to smallest.
There are three main parts of a share structure: authorized shares, outstanding shares, and float.
For this article, we will be using HNSS as an example. We are not affiliated with HNSS in any way. We chose it because our source of data has a share count for each part of HNSS’s share structure. We will be referring to otcmarkets.com for data.
Every stock has a certain amount of authorized shares. Investopedia.com has a very clear definition of authorized shares: “Authorized shares refer to the largest number of shares that a single corporation can issue. The number of authorized shares per company is assessed at the company’s creation and can only be increased and decreased through a vote by the shareholders.”
- According to otcmarkets.com, HNSS at 4,000,000 shares authorized.
Outstanding shares refer to the number of shares “that a company actually has issued. This number represents all the shares that can be bought and sold by the public as well as all the restricted shares that require special permission before being transacted”
- According to otcmarkets.com, HNSS has 170,833,333 shares outstanding.
“Shares that can be freely bought and sold by public investors are called the float.” The float ties in closely with the definition of authorized shares. The float is the most important part of a share strcuture. For the most part, the lower the float, the more volatility a stock usually has.
- According to otcmarkets.com, HNSS has 31,087,127 shares in the float.
There you have it ! Once you get into the habit of checking a company’s share structure before you invest, you will soon learn the importance of a relatively low share count versus a relatively high share count.