Do companies sell shares by selling treasury shares, or do they issue new ones?

Question

Suppose a public company has 1,000,000 authorized shares, of which 400,000 have been issued. The company starts a share-buyback program and buys 100,000 shares. So there are now 100,000 shares in the treasury, and 300,000 in the public's hands. Suppose a few years later, the company decides that it needs cash and decides to sell shares. When it sells shares (e.g. using a rights issue, or to a private equity firm), will those shares come from the 100,000 treasury shares, or will those shares come from the 600,000 shares that have never been issued before?

Answer 1

It can do either, or both. There's really no difference from a cash perspective, only a slight difference in how the change in equity is bucketed (Drop in treasury stock vs. an increase in Paid-in Capital).