Metals Exploration Co. - Stock Certificate

Stamped Treasury Stock.

A treasury stock or reacquired stock is stock which is bought back by the issuing company, reducing the amount of outstanding stock on the open market ("open market" including insiders' holdings).

Stock repurchases are used as a tax efficient method to put cash into shareholders' hands, rather than paying dividends, in jurisdictions that treat capital gains more favorably. Sometimes, companies repurchase their stock when they feel that it is undervalued on the open market. Other times, companies repurchase their stock to reduce dilution from incentive compensation plans for employees. Another reason for stock repurchase is to protect the company against a takeover threat.

The United Kingdom equivalent of treasury stock as used in the United States is treasury share. Treasury stocks in the UK refers to government bonds or gilts.

Limitations of treasury stock

• Treasury stock is not entitled to receive a dividend
• Treasury stock has no voting rights
• Total treasury stock can not exceed the maximum proportion of total capitalization specified by law in the relevant country

When shares are repurchased, they may either be canceled or held for reissue. If not canceled, such shares are referred to as treasury shares. Technically, a repurchased share is a company's own share that has been bought back after having been issued and fully paid.

The possession of treasury shares does not give the company the right to vote, to exercise preemptive rights as a shareholder, to receive cash dividends, or to receive assets on company liquidation. Treasury shares are essentially the same as unissued capital, which is not classified as an asset on the balance sheet, as an asset should have probable future economic benefits. Treasury shares simply reduce ordinary share capital.

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