Treasury stock
In finance, a treasury stock (a.k.a. reacquired stock) is stock which is bought back by the issuing company. It reduces the amount of outstanding stocks on the open market. On the balance sheet, treasury stock is listed under Shareholder Equity.
Under Companies Act 1955, companies are not allowed to hold its own shares. Companies Act 1993 appealed this. Limitations include:
- Treasury stock does not pay dividend
- Treasury stock has no voting rights
- Total treasury stock do not exceed 5% of total issued
After buyback, the company can either retire the shares or hold the shares for later resell. Buying back stocks reduces outstanding shares, thus it can cause the value of outstanding shares to appreciate.
See also
