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> You have an expected return because you are taking on risk. I have a dumb question. Most publicly traded companies rarely issue new shares. Why does a compan

> You have an expected return because you are taking on risk. I have a dumb question. Most publicly traded companies rarely issue new shares. Why does a company care about its share price? If we are being rewarded for buying and holding their shares based on the growth a company makes quarterly, how does the company benefit from their share price going up? They don't commonly take loans against their shares or issue new shares. I know they have a duty to shareholders but... take Facebook for example. Who cares if their stock is down 60%? How does it affect the companies financials?

snake_doc 5y ago
> Most publicly traded companies rarely issue new shares. False, most public companies have stock based compensation plans, which are ways of issuing new shares. Without them, they would need to substitute stock compensation with cash to acquire talent. Facebook issues shares every time they approve a new stock based compensation plan.
- MuffinFlavored 5y ago
  https://finance.yahoo.com/quote/FB/key-statistics?p=FB https://finance.yahoo.com/quote/FB/key-statistics?p=FB FB has 2.3b shares outstanding. How much has that number grown past 12 months, 24 months, 36 months so I can put what you are discussing into perspective?
  - snake_doc 5y ago
    It's not as simple as looking at the stock of outstanding shares to determine issuance, as it's a net figure. In terms of new issuance, FB spends billions in stock based compensation each year since 2012, all of these are new issuance under the equity incentive plan. It was ~$9.164B for FY2021 alone. In terms of buybacks, FB started buying back stocks in 2017 and has continued since. In FY2021, they spent ~$55.47B to buy back stocks. Therefore, outstanding shares have been decreasing since around 2020. But this doesn't mean the company stops issuing shares. The more stock prices fall, the more equity they would need to issue to compete for talent, or alternatively supplement with cash. Long term, stock prices is one of many measures of how the company would be able to raise capital (stock based compensation is an indirect way of raising capital). Data from Bloomberg: https://postimg.cc/Lq0sNCJV https://postimg.cc/Lq0sNCJV
anamax 5y ago
> I have a dumb question. Most publicly traded companies rarely issue new shares. Why does a company care about its share price? If a company doesn't care about share price, the shareholders will elect a board of directors who will install a management team that does care about share price.
- MuffinFlavored 5y ago
  i’m just trying to understand why a good share price benefits the company financially? It benefits the shareholders, and all the executives who are paid in stock. But I don’t understand why financially accompany benefits from a high share price unless they are diluting and issuing shares
  - anamax 5y ago
    The question is not whether the executives are paid in stock, it's whether they're paid at all. Executives who don't worry about share price get to work somewhere else.
    - MuffinFlavored 5y ago
      i’m not asking about the executives or the board. Why does a company benefit financially if it stock goes up other than being able to issue stock more easily?
      - MisterMower 5y ago
        I think you are confused about the causation. Shares of stock represent ownership in a company. If the company performs well and earns increasing amounts of money over time, that means the company is more valuable. If the number of shares remain static, increasing earnings means the value of the company is higher on a per share basis and justifies a higher price per share. The company performance drives the stock price.
        MuffinFlavored 5y ago
jfengel 5y ago
The company's board is appointed by its shareholders. The shareholders care, so the board cares. And the board hires the executives, so the executives care. You don't actually need a separate "fiduciary duty". It comes from the shareholders themselves. If the shareholders are happy with a company has motivations other than maximizing profit, they can. There's even a legal category for that: Public Benefit Corporation. Some of them are publicly traded -- like Warby Parker. Public Benefit Corporations are somewhat protected from shareholders forcing them to pursue profits, which will hurt the stock price, but investors can value the stock based on the benefit they perceive the company to be doing. (Like Warby Parker giving away free glasses to poor people.) For regular companies, the executives try to make the line go up because if they don't, they'll lose their jobs.
Ekaros 5y ago
They could issue shares to raise capital. That shouldn't actually affect the stock price as now company is more valuable. Question is where to use this capital? Also currently debt is very cheap, so it might be simpler for them to take on debt.

snake_doc 5y ago

> Most publicly traded companies rarely issue new shares. False, most public companies have stock based compensation plans, which are ways of issuing new shares. Without them, they would need to substitute stock compensation with cash to acquire talent. Facebook issues shares every time they approve a new stock based compensation plan.

MuffinFlavored 5y ago
https://finance.yahoo.com/quote/FB/key-statistics?p=FB https://finance.yahoo.com/quote/FB/key-statistics?p=FB FB has 2.3b shares outstanding. How much has that number grown past 12 months, 24 months, 36 months so I can put what you are discussing into perspective?
- snake_doc 5y ago
  It's not as simple as looking at the stock of outstanding shares to determine issuance, as it's a net figure. In terms of new issuance, FB spends billions in stock based compensation each year since 2012, all of these are new issuance under the equity incentive plan. It was ~$9.164B for FY2021 alone. In terms of buybacks, FB started buying back stocks in 2017 and has continued since. In FY2021, they spent ~$55.47B to buy back stocks. Therefore, outstanding shares have been decreasing since around 2020. But this doesn't mean the company stops issuing shares. The more stock prices fall, the more equity they would need to issue to compete for talent, or alternatively supplement with cash. Long term, stock prices is one of many measures of how the company would be able to raise capital (stock based compensation is an indirect way of raising capital). Data from Bloomberg: https://postimg.cc/Lq0sNCJV https://postimg.cc/Lq0sNCJV

anamax 5y ago

> I have a dumb question. Most publicly traded companies rarely issue new shares. Why does a company care about its share price? If a company doesn't care about share price, the shareholders will elect a board of directors who will install a management team that does care about share price.

MuffinFlavored 5y ago
i’m just trying to understand why a good share price benefits the company financially? It benefits the shareholders, and all the executives who are paid in stock. But I don’t understand why financially accompany benefits from a high share price unless they are diluting and issuing shares
- anamax 5y ago
  The question is not whether the executives are paid in stock, it's whether they're paid at all. Executives who don't worry about share price get to work somewhere else.
  - MuffinFlavored 5y ago
    i’m not asking about the executives or the board. Why does a company benefit financially if it stock goes up other than being able to issue stock more easily?
    - MisterMower 5y ago
      I think you are confused about the causation. Shares of stock represent ownership in a company. If the company performs well and earns increasing amounts of money over time, that means the company is more valuable. If the number of shares remain static, increasing earnings means the value of the company is higher on a per share basis and justifies a higher price per share. The company performance drives the stock price.
      - MuffinFlavored 5y ago

jfengel 5y ago

The company's board is appointed by its shareholders. The shareholders care, so the board cares. And the board hires the executives, so the executives care. You don't actually need a separate "fiduciary duty". It comes from the shareholders themselves. If the shareholders are happy with a company has motivations other than maximizing profit, they can. There's even a legal category for that: Public Benefit Corporation. Some of them are publicly traded -- like Warby Parker. Public Benefit Corporations are somewhat protected from shareholders forcing them to pursue profits, which will hurt the stock price, but investors can value the stock based on the benefit they perceive the company to be doing. (Like Warby Parker giving away free glasses to poor people.) For regular companies, the executives try to make the line go up because if they don't, they'll lose their jobs.

Ekaros 5y ago

They could issue shares to raise capital. That shouldn't actually affect the stock price as now company is more valuable. Question is where to use this capital? Also currently debt is very cheap, so it might be simpler for them to take on debt.