Final answer:
Shares of stock repurchased by the company become treasury stock, which are not part of the outstanding shares. Treasury stock can affect the value of remaining shares and is used for various strategic reasons by the company.
Step-by-step explanation:
Shares of stock that are repurchased by the company are referred to as treasury stock. When a company issues stock, it sells shares to investors, and these shares represent ownership in the company. Publicly traded companies like IBM, AT&T, Ford, and Microsoft have millions of shares that are owned by a diverse group of shareholders, each having only a small percentage of the total company ownership. However, when a company buys back its own shares, these repurchased shares become treasury stock and are not considered part of the outstanding shares for dividend payments or voting purposes.
A company may repurchase its stock for various reasons, such as to reduce the number of outstanding shares and increase the value of remaining shares, or to prevent other shareholders from taking a controlling stake in the company. It's important to note that treasury stock does not provide the same rate of return as outstanding stock, such as dividends or capital gains, since they are held by the company itself.