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A calculation that quantifies the potential shareholder dilution resulting from equity grants (stock options, restricted stock/RSUs, SARs, performance shares). Overhang is presented as a percentage of total company shares outstanding. The numerator of the fraction is the number of shares reserved in the stock plan, or the outstanding equity awards plus the remaining shares for granting. The denominator is the total number of company shares outstanding, which can include outstanding stock grants and shares reserved for granting. Too much overhang prompts concerns about earnings-per-share dilution and can cause institutional investors to vote against any new or amended stock option plans. For details, see the FAQ on dilution elsewhere on this website.
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