When shares are sold back to the company, which type of shares are they considered?

When shares are sold back to the company, they are classified as treasury shares. Treasury shares are those that were previously issued to shareholders and then reacquired by the corporation itself. These shares are held in the company's treasury and can be reissued or canceled at a later date, but they do not have voting rights or rights to dividends while held as treasury shares.

This classification is essential because it reflects the company’s control over a portion of its own equity, allowing for flexibility in managing capital structure. For instance, a company might buy back its shares to increase earnings per share or to have shares available for employee incentive programs.

In contrast, common shares typically refer to the equity ownership in a corporation, which includes voting rights but does not apply to shares that have been repurchased by the corporation. Preferred shares are a class of stock with preferential rights, usually concerning dividends, and convertible shares are those that can be converted into another form of equity, such as common shares. Neither of these categories captures the specific scenario of shares that a company purchases back from the market.