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I'm beginner in stocks. I know that public companies can sell their stock shares, but what about renting them for a period of time and getting them back? Are there any certain examples that a company rented a part of its ownership for a period of time?

I've heard about bonds, but is bonds operation same as renting stock shares?
Also (mostly) in Islamic countries, there's a term Sukuk that I think in comparison with bonds, it's more similar to renting stocks.

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  • It is theoretically possible, almost anything between property can be agreed upon by two parties. I'm not aware of this as a practice, although there are some rough analogs to it such as with warrants and some employee options agreements with certain privileges (like 83b elections in the US)
    – CQM
    Sep 14 '21 at 21:14
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    @reza alizadeh - It would help if you could explain why you think either party in the deal would get out of the deal to make it worth doing something like this.
    – JohnFx
    Sep 14 '21 at 22:43
  • A company can issue convertible bonds to borrow money from the market. Depending on the details of the bond issue, the bondholder might convert the bond to shares, or the company might choose to convert the bond to shares rather than pay it back in cash.
    – The Photon
    Sep 15 '21 at 5:02
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I doubt it

It's hard to prove a negative, but the question on its face is almost a contradiction of terms.

Shares give you the ability to own part of the company so the concept of a company renting them makes little sense. For example, why would a company want to rent you the ability to vote on decisions it makes? You could vote to not have to return the shares!

From the perspective of the rentee, what do you expect to get out of the share? Typically most investors want to get dividends and/or appreciation of the stock (maybe from future dividends). However, if you have to return the stock after a period, you'd lose any appreciation. Any dividends are at the company's discretion - it could simply wait until it has the stock back before paying them.

Shares can be rented to enable shorting but this is not something that's usually considered in a company's interest. It works because shares have value and that wouldn't necessarily apply if they had to be returned to the company.

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This is entirely possible in principle. It would be a way to gain additional income on treasury shares, much as any holder of shares in a brokerage account can gain income by lending them if the broker allows.

Normally, treasury shares are something of an accounting cipher because they don't affect the number of outstanding shares or the value of the company. They typically become real only when the company sells them on the stock market (secondary offering). This could be done whether they were previously counted as treasury shares or whether they previously didn't exist at all.

Given that treasury shares are on the books, there doesn't seem to be any fundamental obstacle to lending them rather than selling them, although stock trading infrastructure might not readily support it (since they are not part of the public float). Rather than responding to the price of the stock, the company would be responding to the current borrow fee. If the stock is hard to borrow, this would be an opportunity to earn a yield by conjuring shares into existence.

It would temporarily increase the effective supply of stock and facilitate short selling, which the company might not like, but the yield might make it worthwhile, and there is no dilution. Dividends paid on the lent shares would be paid right back to the company as payments-in-lieu by the borrower.

As for ideas like the owners of lent shares voting to not have to return them to the company, such a measure would violate laws or by-laws on equitable treatment of shareholders (versus owners of ordinary non-lent shares). There cannot be only lent shares, because a company with zero outstanding shares doesn't exist.

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  • "There cannot be only lent shares, because a company with zero outstanding shares doesn't exist." I'm not sure this follows. The answer you link to says nothing about lent shares, only about buybacks.
    – NPSF3000
    Sep 15 '21 at 23:56

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