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Understanding Treasury Stocks, Complete Objectives with Examples

The definition of treasury stock is mandatory for investors to know. This way it helps you to choose the right instrument to run it.

As many people already know, stocks are an investment instrument that has quite a lot of demand.

Not only those who have permanent jobs, but anyone can do these activities as long as they have a TIN and KTP.

There are many types of stock investments that are quite recommended. However, there are also several types of shares that are not generally described and cannot even be purchased.

The stock in question is treasure. So what is the meaning of treasury shares, here’s a full review.

Also Read: How to read a simple stock moving average and its types

Know the Definition of Treasury Stock

Treasury shares are shares bought back by the company from the hands of investors. This is how a company does when market conditions fluctuate significantly.

In addition, if the company wants its shares back, there are rules that need to be met. All have been recorded in the Financial Services Authority Regulation.

As for the reason why the company does this.

  • Exchange the company’s securities
  • The next reason is to boost stock prices
  • Sell ​​it back to company employees
  • Distribute shares for dividends.

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Purpose of Buying Shares Back

The purpose of repurchasing shares is in an effort to maintain its price. So the stock doesn’t fall.

The definition of treasury stock is clear. The goal is to save stocks from prices that are too low.

Share repurchases are usually also prompted by the relevant authorities, such as a market crash.

These shares are temporary or permanent. It’s just that generally only temporary.

The shares are not the company that holds them. Thus, the company can one day release it to the public.

If the shares are released to the public, the company will get additional proceeds from the sale of these shares. So the company will get additional cash that can be useful for various purposes.

Also Read: The Cause of GOTO’s Stock Drop Occurs Globally, The Worst Condition

Sample Treasury Stocki

If you still don’t understand the meaning of treasury stock, now there is an example. From the following example, you will understand it more clearly.

For example, a company X runs an IPO by selling 20% ​​of its ownership to the public. So that company X still owns 80% of the shares.

After a few years later there was a stock turbulence that made X’s stock fell sharply. Due to these conditions, management made a decision to buy back shares or treasury.

The management of the company does not directly buy the shares in full.

However, the company only bought 5%. So that the purchase of 5% shares is called treasury shares.

A shareholder company can certainly experience various conditions. For this reason, companies must also be able to overcome various things that occur.

Like when a company’s stock drops drastically.

Then overcome it by buying back shares or treasury. As an investor, you also need to know the meaning of treasury shares. (R10/HR-Online)

Source : HarapanRakyat.com

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