Treasury Stock
What It Is
Treasury stock consists of shares a company has repurchased and holds rather than retiring or reissuing.
Why It Matters
Treasury stock reduces outstanding shares, affects EPS, and provides flexibility for compensation plans or future issuance.
How It Works
- Company buys back shares
- Shares become treasury stock
- They do not receive dividends or voting rights
- Can be reissued or retired later
Key Components
- Share repurchases
- EPS impact
- Capital allocation
- Balance sheet treatment
Example
If a company repurchases 10 million shares, those shares become treasury stock and reduce the public float.
Key Takeaways
- Treasury stock reduces dilution.
- It supports EPS and share price.
- It gives companies strategic flexibility.