As the name suggests, treasury shares are those that a company keeps in its own treasury. It either comes from a repurchase or buyback from shareholders or it may be stock that was never issued.
Samsung Electronics today announced that the company's Board of Directors has approved a plan to cancel all existing treasury shares held by the company. At present value, the treasury shares held by Samsung Electronics are worth almost $43 billion.
The treasury stock was retained by the company to use as a financial resource for merger and acquisition transactions as well as for securing talented professionals. However, it feels that the strong balance sheet and increase in cash holdings of the company have reduced the need to hold treasury shares.
To limit the impact on the financial market as the value of these shares exceeds $40 billion, Samsung is going to cancel them in two stages. The first stage will see the cancellation of 50 percent of the holding which is about 9 million common and 1.6 million preferred shares. The remainder will be canceled after the board's approval in 2018.
Samsung holds 17,981,686 of common shares which accounts for 12.9 percent of the outstanding common stock and 3,229,693 of preferred shares which equal to 15.9 percent of the outstanding preferred stock in its treasury. This step is part of Samsung's commitment to enhance long-term value for shareholders.
