Series 6: 4.1.1.1. Treasury Shares

4.1.1.1.  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 shares are considered to be issued shares; however, they have no voting rights and pay no dividends.

Corporations acquire treasury stock for several reasons. 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 show the market that the company views