For SBs: WTF is "Re-issuance of treasury stock under stock compensation plans"
I saw this account in the Statement of Shareholder's Equity. What the heck is it? On the account's row in the Statement, there's a large decrease under the APIC column, and an even larger increase (absolute value-wise) under the Treasury Stock Column.
What is happening here, and how should I incorporate it when modeling projections of shareholder's equity? Thanks for any help.
troll post, mods remove
When a company repurchases its own shares, it becomes treasury stock. When paying out equity based comp to its employees, the company has the option to re-issue the shares it repurchased as compensation as opposed to issuing new shares/stock options.
The decrease in additional Paid in capital could be a result of re-issuing stock as compensation at a lower price than the initial repurchase price (when the company did the share repurchase).
For example if the company repurchased shares at $10/share, but re-issued it as comp at $8/share, paid in capital should decrease as would the treasury stock account.
If they're re-issuing treasury stock, why is treasury stock increasing and not decreasing? Doesn't reissuing treasury stock mean they're taking treasury stock and reissuing it i.e. changing it back into "regular" stock? So that should decrease treasury stock right? But that's not what's happening on the statement...
Treasury stock should be a contra-equity account and should be negative. When shares are repurchased the treasury stock line item should decrease and increase when they are re-issued or sold. Additional paid in capital can either increase or decrease based on whether the stock is sold/re-issued at a higher or lower price than it cost during repurchase.
Sorry I'm on my phone it's a bitch to type. Hopefully someone can explain it in a non-retarded way.
Man, Flake really wants those SBs.
Selling treasury stock at higher price than purchased for:
Say treasury shares bought at $10. Sell for $15.
Dr: Cash $15 Cr: Treasury stock $10 (treasury stock is a contra asset, so a credit is decreasing the account) Cr: APIC $5
Selling treasury stock at lower price than purchased for:
Say treasury shares bought at $10 Sell for $5
Dr: Cash $5 Dr: APIC $5 Cr: Treasury stock $10
In this scenario you are decreasing APIC and decreasing the absolute value number of Treasury stock. Is that what you are seeing?
If not, this may be multiple transactions where they sold treasury stock and have also repurchased shares at a different price.
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