How does the company affect the price of its stock? Why is a company concerned about its stock price in the secondary market?
2007-02-01 05:30:07 · 4 answers · asked by kitsune12 1 in Business & Finance ➔ Investing
No. The company does not make any money when people buy and sell the stock in the secondary market.
The company wants to keep its stock price high for a number of reasons.
1) If it needs to raise money, a well-performing, attractive stock price can allow it to sell more stock through a secondary offering (another IPO in essence) or secure better debt financing;
2) It affects the net worth of most of the management and employees. The higher the stock price, the more money they all have through their company stock and stock options;
3) It is good, free advertising and public relations when their stock soars;
4) They need to meet certain "listing standards" to stay on the NYSE, NASDAQ, etc. Part of that is having a high enough stock price;
Those are the main reasons.
2007-02-01 05:42:14 · answer #1 · answered by JoePonzio 2 · 1⤊ 0⤋
The company does not receive money when stock is traded in the secondary market - the only receive money from the primary (IPO) market.
The company is concerned about the stock price because a great deal of stock is still in the company (officers, employee stock plans, etc) so it is in their best interest to have stock maintain a higher market value.
2007-02-01 08:17:14 · answer #2 · answered by dashel_gabelli 3 · 0⤊ 0⤋
I'm not sure I understand what your asking. If you mean a second offering to investors then the company gets the capital the investors use to buy the stock. If you mean after the stock has been issued, then the secondary market is the stock market itself where investors can buy/sell the stock between themselves and can earn any profits from capital appreciation.
The company affects the price of it's stock by adding value to the business, usually by increasing earnings, sales and revenue.
A business is concerned about it's stock price because they usually are looking for growth. To help them grow they need the money they raise through investors. If the investors can't make a good return on their money then they won't invest in the company. So the company is seeking to keep the money flowing by making their business attractive to investors.
2007-02-01 05:43:46 · answer #3 · answered by mdf666 1 · 0⤊ 1⤋
The company only receives money for a share when it is first issued. However, the increase in the value of the shares effect the value, but not the cash balance, of the company.
2007-02-01 05:38:08 · answer #4 · answered by Terri J 7 · 1⤊ 0⤋