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> 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 abou
by 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 agoi’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 agoThe 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 4y agoi’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 4y agoI 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 4y agowhat benefits does the company being more valuable bring to it? better financing with banks?
- anamax 4y agoI'll repeat myself. If I own stock in a company whose executives do not work to keep the stock price up or even increasing, I will replace those executives with executives who will work to keep the stock price up/increasing. (Corollary - I will not buy stock in a company whose executives are unconcerned with stock price. That unwillingness means that folks who own stock and might want to sell it to folks like me will "encourage" executives to make that possible.) Is it really hard to understand that stockholders care about stock prices and that they will "encourage" the company to maintain/increase the value of their investment? Would you buy stock in a company that didn't try to maintain/increase the stock price? Why? This has nothing to do with bank financing or further stock sales by the company, although those can also be factors.
- lomex2000 4y agoYour question was answered before. Companies issue stocks to generate cash. The higher value the stock the more cash the company can generate by keep issuing stocks. The stocks can also be used to secure loans and as a compensation for employee and the board. So the company benefits in a lot of ways by increasing stock prices.
- anamax 4y ago> i’m not asking about the executives or the board. Since the executives and the board decide what a company does, it's absurd to ignore them. I get that you have a model of companies that isn't consistent with how companies behave. That mismatch tells you that your model is wrong. It isn't reality's job to explain itself in terms that you choose. Your model doesn't account for all relevant facts, such as the interests of stock-holders.