Fully diluted refers to all of the shares that a company has issued, all of the shares that have been set aside in a stock incentive plan, and all of the shares that could be issued if all convertible securities (such as outstanding warrants) were exercised.
A key difference between fully diluted shares and shares issued and outstanding is that the total of fully diluted shares will include all the shares in the employee option pool that are reserved but not yet issued to employees.
important If you’re trying to figure out the likely percentage a number of shares will be worth in the future, it’s best to know the number of shares that are fully diluted.
technical Even the fully diluted number may not take into account outstanding convertible securities (like convertible notes) that are waiting to be converted into stock at a future milestone. For a more complete understanding, in addition to asking about the fully-diluted capitalization you can ask about any convertible securities outstanding that are not included in that number.