Series 79: Treasury Stock Method

Treasury Stock Method

1. 1. Determine the number of outstanding options that the company has issued on its stock that are “in the money,” meaning exercisable. For example, an option to purchase shares at $20 would be in the money if the shares were trading at $25, but not if the shares were trading at $18.
2. 2. Find the total number of shares if all the in-the-money shares were exercised. (Add the current outstanding shares to the in-the-money shares.)
3. 3. Calculate the proceeds the company would receive if all in-the-money options were exercised.
4. 4. Determine how many of its shares the company could repurchase with the proceeds.
5. 5. Subtract the number of treasury shares that the company repurchased from total number of shares (including in-the-money shares).

Example: Semi Conductors, a concierge service for truckers, has 1 million shares issued and outstanding. Semi’s stock currently trades at $30 per share. The company has 100,000 outstanding options to purchase its s