DEFINITION of 'Treasury Offering'

A treasury offering occurs when a firm sells all or a portion of its own treasury stock to investors in the open market. Treasury stock are shares of stock that a publicly traded company registered for sale with the Securities and Exchange Commission ("SEC") but did not actually sell to the public. Treasury stock also refers to shares of stock that the company bought back from shareholders and now hold internally.

BREAKING DOWN 'Treasury Offering'

Treasury offerings with treasury stock are unlike common stock or preferred stock shares that are marked as outstanding in the company's financial statements. Treasury stock is not considered outstanding, so it is not used to calculate dividends or earnings per share. However, even though treasury stock is not issued, investor awareness of the existence of these shares can affect market sentiment and activity around the firm's publicly traded shares.

The Case for a Treasury Offering

Treasury offerings are undertaken as a way for a firm to raise capital for new projects or investments. This method of raising money is generally less expensive than other methods, such as issuing new common shares or preferred shares, which involve engaging an investment bank and additional filings with the SEC. Treasury offerings also allow the company to avoid issuing debt to raise capital, which may be particularly troublesome and expensive during a downturn in the business cycle or during a period of generally high interest rates. By issuing a treasury offering of stock already owned, the company does not incur additional costs to create shares.

The Downside of a Treasury Offering

Treasury offerings are particularly accretive when the firm's shares are trading at historically high valuations. However, much as investors keep a close eye on the trading activity in the firm's stock undertaken by firm executives and insiders, the company's treasury offering may be taken by investors as a sign that the company's outlook for the future is not altogether positive, and it is looking to sell shares now while the market price is high. Additionally, treasury offerings cause dilution for existing shareholders. The treasury stock sold in a treasury offering is now considered outstanding and entitled to the same pro-rated amount of earnings and dividends as all other shareholders. Now, the company's earnings and dividends must be divided among a greater number of shares, which results in a smaller claim on those earnings and dividends for investors who held shares prior to the treasury offering. This is referred to as the dilution of existing shareholders.

  1. Treasury Stock (Treasury Shares)

    Treasury stock is outstanding stock the issuing company buys ...
  2. Treasury Secretary

    The Treasury secretary is the head of the U.S. Department of ...
  3. Treasury General Account

    The Treasury General Account is the general checking account, ...
  4. Treasury Bond - T-Bond

    A treasury bond is a marketable, fixed-interest U.S. government ...
  5. Off-The-Run Treasury Yield Curve

    Off-the-run treasury yield curve refers to U.S. government bonds ...
  6. Treasury Lock

    Treasury lock is a hedging tool used to manage interest-rate ...
Related Articles
  1. Investing

    The Importance Of U.S. Treasury Rates

    U.S. Treasury bond interest rates affect more than just bondholders! It impacts the day to day lives of all consumers.
  2. Investing

    China Dumps U.S. Treasury Securities in December

    On Tuesday, Treasury International Capital (TIC) data was released by the U.S. Department of the Treasury, which revealed that China’s holding of U.S. Treasury bonds in December has declined ...
  3. Insights

    What Are the Duties of the Treasury Secretary?

    The Secretary of the Treasury is one of the most powerful positions in the U.S. federal government.
  4. Investing

    Treasuries Rout May Deepen on Mortgage Hedging

    Fed rate hikes may spur mortage bond owners to sell Treasuries to reduce their exposure to rising rates
  5. Financial Advisor

    Get This: Bonds Beat Stocks After All

    Data shows that long-term Treasury securities have actually outperformed the S&P 500 over the past 10 years.
  6. Investing

    5 Government Bond ETFs Popular in 2016 (SHY, IEF)

    Discover how the five most popular government bond ETFs can provide access to Treasuries with short-, intermediate- and long-term exposure.
  7. Investing

    IEI: iShares 3-7 Year Treasury Bond ETF

    Take a closer look at the iShares 3-7 Year Treasury Bond ETF, which is a BlackRock issue focused on intermediate maturity government bonds.
  8. Insights

    Why the 10-Year U.S. Treasury Yield Matters

    10-year treasury bond yields are important indicators of the economy as a whole.
  9. Investing

    What's Your Stock's Repurchase Premium?

    Take a closer look at your favorite stock's statement of equity; you never know what you're going to find
  10. Investing

    How To Play Treasuries' New Low

    The 10-year treasury yield hits a new all-time low and a handful of ETFs are moving on the news.
  1. What Is Treasury Stock?

    Find out about shares called treasury stocks that were once part of shares outstanding for a company, but have since been ... Read Answer >>
  2. What's the difference between a capital stock and a treasury stock?

    Learn about treasury capital stock, how to calculate a company's capital and treasury stock, and the differences between ... Read Answer >>
  3. How are treasury bills (T-bills) taxed?

    Lear how the Internal Revenue Service collects taxes on treasury bills (T-bills) purchased from the United States government ... Read Answer >>
  4. Treasury Bond vs Treasury Note vs Treasury Bill

    Understand the types of securities the government issues. Learn the difference between Treasury notes (T-notes), Treasury ... Read Answer >>
Trading Center