Interpreting Quarterly Diluted Shares and Annual Weighted Averages
Summary
The document examines how to interpret diluted share counts shown in quarterly and annual company filings. It distinguishes a fourth-quarter figure displayed by a data provider from the annual diluted share count reported in a 10-K. One response explains that the annual amount is a weighted-average figure across the year’s quarters, illustrated by averaging the quarterly values; the small mismatch in the example may reflect rounding. Another response points to the company’s reported weighted-average diluted shares as the accounting convention for financial reporting.
The discussion cautions that reported diluted shares are not necessarily the only useful share count for investors. Analysts may construct their own fully diluted estimates using assumptions about securities and instruments disclosed across filings and related agreements. Such estimates can differ because of method and assumptions, so the reported figure serves as a common reference rather than a universally correct measure for every purpose. The examples concern one company and do not define a general method for deriving every isolated quarter’s share count.
Key ideas
- A 10-K diluted share figure can represent a weighted average over the fiscal year rather than a quarter-end count.
- Quarterly share-count displays may differ from the annual reported figure because they describe different periods or calculations.
- Rounding can cause a small discrepancy when quarterly figures are averaged.
- Investors may estimate fully diluted shares using assumptions about securities disclosed in company filings.
- Use the reported weighted-average diluted share figure as an accounting reference, while recognizing its limits for other analyses.
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Full text
# Calculate outstanding diluted shares for fourth financial quarter of a company
# Calculate outstanding diluted shares for fourth financial quarter of a company
How would one calculate the correct value of the outstanding diluted shares for the fourth (last) financial quarter of a company?
When using the SEC 10-Q and 10-K forms: The 10-Q forms contain the number of outstanding shares that are specific to the quarter (Q1 to Q3). The 10-K form contains the number of outstanding shares that are specific to the whole financial year.
How would I now calculate the number of outstanding shares that are specific to the fourth quarter?
Example for AAPL (values from 10-K and 10-Q SEC):
- Q1 (10-Q), ending on 2019-12-28 reported 17.818.417.000 outstanding diluted shares
- Q2 (10-Q), ending on 2020-03-28 reported 17.618.765.000 outstanding diluted shares
- Q3 (10-Q), ending on 2020-06-27 reported 17.419.154.000 outstanding diluted shares
- Annual report (10-K), ending on 2020-09-26 reported 17.528.214.000 outstanding diluted shares
What is the amount of outstanding diluted shares when viewing Q4 isolated? I found two different examples: https://stockanalysis.com/stocks/aapl/financials/ Here they display 17.256.516.000 as value for Q4 - although I don't get how they calculated it. Another example is this: https://www.macrotrends.net/stocks/charts/AAPL/apple/shares-outstanding Here they display the same value as the annual 10-K report, so 17.528.214.000 for Q4.
What is the 'correct' way to do this? Is there even a correct way to do it?
I was wondering about it because depending on the calculation of the outstanding shares the value of EPS (and others) may differ.
## Answer by Robbe Van Tillo (score 0)
https://quant.stackexchange.com/a/68290
I believe the annual value is the average for that year.
$\frac{17.818.417.000 + 17.618.765.000 + 17.419.154.000 + 17.256.516.000}{4} = 17.528.213.000$
It's off by 1000 but that might be a rounding error somewhere.
## Answer by Catalyx (score 0)
https://quant.stackexchange.com/a/69907
There is no "correct" way to determine a company's fully diluted shares. There is however an accounting convention that public companies use for financial reporting.
In your case, the latter 4Q20 figure, 17.528.214.000, is what the company reports in its FY2020 10-K.
In that 10-K, you'll find the figure reported as "Weighted-average diluted shares," and see that figure is linked to the accounting convention applied (you'll see a pop-up once you click on the figure; scroll to the third panel of the pop-up).
That panel will look like this:
Professional investors will often create their own calculations based on their own assumptions to determine a fully-diluted share count that factors in a variety of derivative instruments and securities as disclosed in a company's financial statement footnotes, elsewhere in a 10-K or 10-Q, proxy statements, compensation agreement exhibits, debt indentures (for convertible securities), warrants purchase agreements, and other filings.
Because of the complexity of the above and in order to speak a "common language," most investors rely on the reported figure and a company's (usually) undisclosed calculation supporting it.Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.