What are treasury shares?

Treasury shares refer to a company’s own shares that have been repurchased from the market. Once a company buys back its shares, those shares are not considered when calculating earnings per share or dividends, and they do not carry voting rights. This buyback can be part of a strategic financial move to reduce the number of outstanding shares, thereby potentially increasing the value of the remaining shares, or to utilize shares for employee compensation plans.

The nature of treasury shares distinguishes them from other types of shares. For example, shares sold to investors represent capital raised by the company, while shares with voting rights are typically associated with ownership and governance in regular stockholding scenarios. Furthermore, shares exclusively issued to executives fall under the category of executive compensation or restricted stock, which is not the same as treasury stock. Understanding this distinction is vital for grasping how companies manage their capital structure and shareholder equity.