2006-09-21 23:30:18 · 8 answers · asked by vinod ashar 1 in Business & Finance ➔ Investing
The answer has two parts:
When a company first 'goes public' by selling shares to outside investors the first time they are usually advised by investment bankers on what kind of value the company has and what the resulting price per share can be. They do this by assessing the company's earnings and growth prospects, examining similar companies, and deciding on a 'mulitple' of their revenues or earnings. For example, if the company is currently earning $10 million in profit and is projected to grow at 10% a year, and similar companies in their industry are trading at 25 times their earnings with similar growth, then this company is likely to be valued by the market at 25 x $10 million or $250 million. If they want to sell half the company to the public that would be $125 million. So they'd probably make the deal 10 million shares at $12.50 per share.
Now for part two. Once the shares are sold this way, they then begin trading in the open market, such as the NYSE or Nasdaq. At that point the moment-to-moment price is determined by the ebb and flow of supply (folks who want to sell shares) and demand (folks who want to buy shares.) They do this by placing orders in markets, and if more folks want to buy the stock (perhaps because of news, or changing perceptions about the prospects of the company or the economy) the price rises, and vice versa.
2006-09-21 23:48:48 · answer #1 · answered by ProfessorOddlot 4 · 0⤊ 0⤋
The price is fixed by whatever the buyer will pay for the shares of the stock. There is a lot of factors that will help determine that price. A famous quote is "what the greater fool will pay", which really holds true. Hopefully you will learn not to be "'the greater fool"!
2006-09-21 23:45:06 · answer #2 · answered by jazzzame 4 · 0⤊ 0⤋
That is why we have Stock Exchanges. There are buyers and there are sellers of any particular stock. Each party has to come to agreement on a Price - if they cannot reach agreement - there is No SALE.
2006-09-21 23:42:22 · answer #3 · answered by fatsausage 7 · 0⤊ 0⤋
Ultimately: The market!
What's a comapamy? You better spend at least a year learning investing before you buy even one share.
2006-09-22 00:12:54 · answer #4 · answered by Common Sense 7 · 0⤊ 0⤋
Dude,
If ur new entering into this market , then better invest in Mutual Funds first which u lead to some knowledge then think abt entering the markets directly
2006-09-21 23:38:22 · answer #5 · answered by ACE 2 · 0⤊ 0⤋
u thinkin about investin in co.
u better join some school & continue with ur studies
ha ha ha
2006-09-21 23:34:13 · answer #6 · answered by jay Z 4 · 0⤊ 0⤋
It's like gambling.
2006-09-22 03:49:06 · answer #7 · answered by johnnylakis 4 · 0⤊ 0⤋
1) Supply and Demand
2) You and me (If you are buying and I am selling or if you are selling and I am buying)
2006-09-22 11:18:50 · answer #8 · answered by Anonymous · 0⤊ 0⤋