In finance, a treasury stock or reacquired stock is stock which is bought back by the issuing company. It reduces the amount of outstanding stocks on the open market ("open market" including insiders holdings). On the balance sheet, treasury stock is listed under shareholder equity as a negative number. Sometimes, companies do this when they feel that their stock is undervalued on the open market.
Total treasury stock can not exceed 5% of total capitalization
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. In addition, it can serve as a signal to investors.
Regulatory
In the US, the Companies Act of 1955 dissallowed companies from holding their own shares. However, the Companies Act of 1993 later repealed this.
Stockdividends or Scrip dividends (common) are those paid out in form of additional stock shares of the issuing corporation, or other corporation (e.g., its subsidiary corporation).
If a holder of the stock chooses to not participate in the buyback, the price of the holder's shares should rise, but the tax on these gains is delayed until the actual sale of the shares.
Unlike joint stock company dividends, these payments are made in proportion to a members' spending with the co-operative society, not the number of shares they hold in it.
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