Define treasury stock that companies buy back and what is th

Define treasury stock that companies buy back and what is the point of doing that

Solution

Treasury stock->

Treasury stock are the portion ofshares that a company keeps in its own treasury. Treasury stock may have come from a repurchase orbuyback from shareholders, or it may have never been issued to the public in the first place. These shares don\'t pay dividends, have no voting rights and should not be included in shares outstanding calculations.

A buyback, also known as a repurchase, is the purchase by a company of its outstanding shares that reduces the number of its shares on the open market. Companies buy back shares for a number of reasons, such as to increase the value of shares still available by reducing the supply of them or eliminate any threats by shareholders who may be looking for a controlling stake

Buybacks can be carried out in two ways:

1. Shareholders may be presented with a tender offer where they have the option to submit, or tender, a portion of or all of their shares within a certain timeframe and at a premium to the currentmarket price. This premium compensates investors for tendering their shares rather than holding on to them.

2. Companies buy back shares on the open market over an extended period of time and may even have an outlined share repurchase program that buys back shares at certain times or at regular intervals.