• The overhang is a measure of the potential dilution to which ordinary shareholders are exposed due to the possible award of share-based compensation.

  • Overhang is usually presented as a percentage and is calculated as the sum of the share options granted plus the remaining options to be granted divided by the total number of shares outstanding.
  • In a broader sense, overhang can also refer to downward pressure caused by having a large block of shares that can be sold.
  • The overhang is calculated by dividing the number of existing and future option issuances by the total number of shares outstanding.
  • The higher the overhang number, the greater the risk.