fully diluted shares

Definition

The total number of shares that would be outstanding if all convertible securities, options, and warrants were exercised—basically the shareholding version of inviting everyone who might show up to the party. It shows what ownership really looks like after employees exercise options and investors convert preferred shares.

Example Usage

The fully diluted share count was 50% higher than basic shares, revealing that employees and investors were poised to seriously dilute existing shareholders.

Origin

Became important as stock options and convertible securities became common compensation tools in the late 20th century.

Fun Fact

Earnings per share can look very different on a basic versus fully diluted basis, which is why the SEC requires reporting both.

Source: Equity accounting terminology

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