What is Treasury Stock?
The term treasury stock refers to common shares which have been repurchased or reacquired through the open market by the issuing company. This action will reduce the float, or number of common shares outstanding. It can also be common shares which were not issued to the public during the initial public offering (IPO) for the purpose of being able to sell the shares at some point in the future when cash is needed. The amount of treasury stock held by a company can be easily found on the balance sheet as a line item, within the Shareholders Equity section. There is heavy debate as to whether or not this line item should be listed as an asset on the balance sheet.
Treasury stock is any shares issued by a corporation that have been repurchased by the company and are currently not offered for sale to investors. The stock is not considered to be outstanding, although the shares remain active and may be resold by the corporation at some future date. There is no time limit on how long a company may hold on to treasury stock. While the treasury stock is in the possession of the issuer, the shares do not provide the same benefits as the shares that are held by various investors. Treasury stock does not carry voting privileges, nor will the stock provide any type of dividends or earnings per share. In the event that the corporation chooses to offer the shares for sale, the stock would regain both voting rights and be subject to the issuance of dividend payments to the shareholder. A company may choose to collect treasury stock for several reasons. Repurchasing issued shares of stock is often a way to counter a takeover attempt.
