Understanding Equity: What are Treasury Stocks?

Treasury Stock
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Treasury Stock
Treasury stock is a term used to refer to a type of equity that a company opts to buy from the pool of its outstanding share capital using its funds. From this statement, we can deduce that the company is buying its shares as opposed to outsiders buying shares from the company. In this case, the funds used to finance the purchase come directly from the company’s cash/bank account. This ‘eats into’ the company finances but at the same time consolidates its ownership by taking up the available shares thereby avoiding dilution of ownership. This option can be exercised as an agreement with its existing shareholders or directly from the stock exchange market.