How Do You Value Resale Of Treasury Stock?
Treasury stock is the stock a corporation buys back from its shareholders. It is held in the company treasury and has no voting rights, ownership or liquidation value while held in treasury. The cost of buying the stock decreases the company’s shareholder equity because the stock has been removed from the stock outstanding. If treasury stock is not retired by the board of directors of the company, it can be used for employee bonuses or stock dividends, or re-sold to investors. If the company is trading on an exchange, value the stock at market price. The investor does not pay any additional sales commissions on the stock purchase, which is why many investors buy stock directly from the issuing companies. Issue the stock at market price less a discount. This method is used to pay for services, to obtain financing, and to reissue stock in a secondary offering to the market. Discounts to market price vary from a few percent below market price to as much as 50 percent below market price an
