Treasury stock

What is a Treasury stock?

Treasury stock or treasury shares refers to the shares of the firm that have been bought from its shareholders or, in the case of open-market transactions.

Why Do Companies Repurchase Shares?

• Enhancing Shareholder Value
  It means the company can reduce the number of shares in the market to increase the share price, thereby improving financial metrics like EPS and making the stock more attractive.

• Defending Against Takeovers
  Buying back shares limits the number of shares available to outside investors, making it more difficult for someone to then take over the company.

• Using Extra Cash Wisely
  Companies with excess cash may reward the shareholders by repurchasing the shares instead of declaring increased dividends. This route can be more tax-efficient in certain instances.