Series 7: 1.2.1 Treasury Shares

1.2.1  Treasury Shares

Treasury shares, or treasury stock, are shares that were issued in the past and have been repurchased by the company and removed from public circulation. Treasury stock is treated as though it is still in the hands of shareholders and is still considered issued stock; however, it has no voting rights and pays no dividends.

Corporations may acquire treasury stock to serve several purposes. It may be used in employee benefits programs, such as stock options or bonuses for executives, or employee stock purchase plans. It may be used to acquire the assets of another corporation or to thwart a hostile takeover. It may be used to boost the earnings per share of the company: as shares are taken out of circulation, earnings will be divided among fewer shares. An increase in earnings per share will usually boost the share price. In addition, treasury stock is often a good place to invest the company’s excess cash and can cause the market to perceive that the company views its shares to be a bargain.

When treasury stock is withdrawn