Treasury stocks (shares) are the company's shares that were issued and then repurchased from shareholders. Such shares are on the company's balance sheet, but they are neither voting nor have pre-emptive rights, and no dividends are accrued or paid on them.
After purchasing Treasury shares, the company must sell them within a year at a price not lower than the market value, or cancel them. Usually, the company buys back its shares for the following purposes:
- Make payments to shareholders without accrual of dividends.
- Increase the price per share by reducing the total number of shares outstanding.
- Maintain the liquidity or price levels of its shares in the secondary market.
- Make calculations for mergers and acquisitions.
2020-09-24 • Updated