Legal Definitions - subscribed stock

Subscribed stock refers to shares of a company's ownership that an investor has formally agreed to purchase. This agreement creates a binding commitment for the investor to buy the shares and for the company to issue them, even if the full payment has not yet been received or the shares have not been formally delivered. It represents the portion of a company's authorized capital that investors have committed to acquiring.

• Example 1: Startup Funding Round
  A new software startup, "CodeCrafters Inc.," is raising its initial seed funding. An angel investor, Ms. Anya Sharma, signs a formal agreement to purchase 20,000 shares of CodeCrafters Inc. at $2 per share, totaling $40,000. She pays $20,000 upfront and agrees to pay the remaining $20,000 within three months.

  This illustrates subscribed stock because the 20,000 shares Ms. Sharma has committed to buy are now considered subscribed. Her signed agreement creates a legal obligation for her to acquire these shares and for CodeCrafters Inc. to issue them, even though the full payment has not yet been received.

• Example 2: Employee Stock Option Exercise
  Mr. Ben Carter, an employee at "Innovate Tech Solutions," decides to exercise his stock options. He signs a document committing to purchase 5,000 shares of company stock at the predetermined strike price of $10 per share. The company processes his request, and the shares will be officially transferred to his brokerage account within a week after he submits payment.

  Here, the 5,000 shares Mr. Carter has committed to purchasing by exercising his options are subscribed stock. He has made a formal commitment to acquire these shares, and the company is obligated to issue them to him upon payment, even if the actual transfer and registration of the shares are pending.

• Example 3: Pre-IPO Institutional Investment
  Before its Initial Public Offering (IPO), "Green Energy Ventures" conducts a private placement to secure commitments from large institutional investors. "Horizon Capital," a major investment fund, signs a subscription agreement to purchase 1 million shares of Green Energy Ventures stock at a specific price, contingent on the IPO successfully launching within the next six months.

  The 1 million shares that Horizon Capital has formally agreed to buy are subscribed stock. This agreement signifies a firm commitment to acquire the shares once the conditions (like the successful IPO) are met, even though the shares have not yet been issued or fully paid for at the time the agreement is signed.