Fully Diluted Shares are a calculation used to show how much the existing shares of common stock could potentially be diluted if all the convertible securities and employee stock options, were exercised.

Fully Diluted Shares is a calculation used to show the potential number of shares that could hypothetically be called into existence instantaneously by the holders of convertible securities, warrants, employee stock options and so forth.

A finite amount of shares were issued by the company to begin with, and the price of outstanding shares depends on supply and demand; they can be traded, and fluctuate in value, but there are always the same number of shares unless another block is issued, or if convertible shares, employee stock options, warrants, and so forth, are exercised.

If the supply of shares were suddenly flooded, the shareholder’s equity would be diluted among more shareholders, to the dismay of the pre-existing owners of common stock shares. Taking a look at Fully Diluted Shares will give investors an idea of the degree of dilution risk which is present.

What is Dilution?
What is Diluted Earnings Per Share?