Understanding Treasury Stock
Disclaimer: This post discusses general legal issues, but it does not constitute legal advice in any respect. This post is not a substitute for legal advice and is intended to generate discussion of various issues. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel. Cara Stone, LLP. and the author expressly disclaims all liability in respect of any actions taken or not taken based on any contents of this post. The views expressed herein are personal opinion.
Treasury stock is stock that is held in the name of the corporation and is not held by any third party. It is important to note that treasury stock is generally not counted when calculating the fully diluted capitalization of the company.
The fully diluted capitalization of a company refers to the total number of shares issued and outstanding, as well as the shares reserved for issuance under options, warrants, and other types of convertible securities such as convertible notes or SAFEs. These are securities that can be exchanged for shares of stock.
There are various reasons why a company might hold treasury stock. For example, a company may decide to buy back its own shares in order to reduce the number of outstanding shares and potentially increase the value of the remaining shares. This can be done through a stock buyback program.
Treasury stock may also be held by a company as a means of providing shares for employee stock option plans or other employee benefit plans. This allows the company to provide equity-based compensation to its employees without having to issue new shares of stock.
In summary, treasury stock is stock that is held in the name of the corporation and is not held by any third party. It is not counted when calculating the fully diluted capitalization of the company and can be held by a company for various reasons, such as stock buybacks or as a means of providing shares for employee benefit plans.
Disclaimer: This post discusses general legal issues, but it does not constitute legal advice in any respect. This post is not a substitute for legal advice and is intended to generate discussion of various issues. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel. Cara Stone, LLP. and the author expressly disclaims all liability in respect of any actions taken or not taken based on any contents of this post. The views expressed herein are personal opinion.
Treasury stock is stock that is held in the name of the corporation and is not held by any third party. It is important to note that treasury stock is generally not counted when calculating the fully diluted capitalization of the company.
The fully diluted capitalization of a company refers to the total number of shares issued and outstanding, as well as the shares reserved for issuance under options, warrants, and other types of convertible securities such as convertible notes or SAFEs. These are securities that can be exchanged for shares of stock.
There are various reasons why a company might hold treasury stock. For example, a company may decide to buy back its own shares in order to reduce the number of outstanding shares and potentially increase the value of the remaining shares. This can be done through a stock buyback program.
Treasury stock may also be held by a company as a means of providing shares for employee stock option plans or other employee benefit plans. This allows the company to provide equity-based compensation to its employees without having to issue new shares of stock.
In summary, treasury stock is stock that is held in the name of the corporation and is not held by any third party. It is not counted when calculating the fully diluted capitalization of the company and can be held by a company for various reasons, such as stock buybacks or as a means of providing shares for employee benefit plans.
