Treasury Stock (Treasury Shares)

It’s stock. You keep. In your treasury. Like down in that bubbler thing at the bottom of your fish tank with all the shiny jewels. Glug glug.

So how is it that a company would then own shares of its own stock? Well, it would buy them back. From the public or previous investors, most likely.

And companies buy back stock all the time, in part, because it’s a different and more tax-efficient way to return to shareholders quote “excess cash” unquote, as if there ever really is excess cash. When dividends are paid, they are taxed a second time on the backs of the individuals receiving those cash dividends.

But when cash is used to shrink the shares outstanding, in theory, anyway, it charges the stock price per share to go up. So in buying back shares, the company stores them as an asset, and those shares are carefully tracked, because...who knows? The company might some day sell shares and then the treasury stock could come out of the bubbler thing here and get sold back to investors, presumably at a much higher price than at which it was bought.

Treasury stock is really just a kind of placeholder. It doesn’t vote. It doesn’t get dividends. It just sits there, a result of an overfed market.