Share counts are important as they are the denominator for various aspects of the cap table analysis.

Authorized Shares – Before shares are issued, the company’s board needs to authorize them. Authorized shares mean the number of shares that are authorized for current and future issuance (the amount should be sufficient for future issuances; for example for issuance of options).

Outstanding Shares – These are the shares that have been issued (hence a subset of authorized shares). It does not include options that have not been granted and does not include options that have not been exercised, as the shares are only issued when exercised (hence there need to be sufficient authorized shares).

Fully Diluted Shares – This is a calculation that models all the granted options, restricted stock, warrants, and the remainder of the option pool itself, into a number of shares that represents a theoretical count, as if all of these outstanding items were granted and exercised.