Outstanding shares is used to calculate many metrics, including market capitalization and earnings per share (EPS). A corporation’s market capitalization is figured by multiplying its outstanding shares by the market price of one share.

Shares that is held by the public and can be freely bought and sold by public investors are called the float, and this value changes depending on if the company wishes to repurchase shares from the market or sell out more of its authorized shares within its treasury.

Outstanding shares refer to the number of stocks that a company actually has issued.
Stock currently held by investors, including restricted shares owned by the company’s officers and insiders, as well as those held by the public.

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. They have voting rights and represent ownership in the corporation by the person or institution that holds the shares.

When a company buys back its own shares on the open market and returns these shares to the company treasury, this reduces both the float and the number of outstanding shares.
Shares that have been repurchased by the company are not considered outstanding stock any more.

For example, if a company has 1000 authorized shares. If 400 shares is offered in an IPO, 150 is given to the executives and 450 is retained in the treasury, then the number of shares outstanding would be 550 shares (400 float shares + 150 restricted shares). If 100 shares is buy back from the market, the number of outstanding shares would fall to 450, the number of treasury shares would increase to 550 and the float would fall to 300 shares since the buyback was done through the market (400 – 100).