Who set the stock value?

Question

I asked some people about this question before. But their reply doesn't give me the answer I want. I just want to know who is the final person or group to decide the value of share for stock. Is it the Stock market or the company of that stock?

Answer 1

When a company floats on the stock market, the company decides the value of the shares. After the initial public offering (IPO) the stock market decides.

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The best way to explain this is to take an example:

Yahoo went on the market in 1996 with an IPO at $2.05 per share which Yahoo decided was a fair price at that time. From that point onwards the market decides…

Recent Price…

Yahoo (YHOO) - $28.77

Last Trade $28.77
Bid$28.74
Ask$28.80

Sellers of Yahoo are asking for $28.80 to sell their stock

Buyers of Yahoo are bidding $28.74 to buy the stock

The quoted price of Yahoo is the last trade at $28.77 – this is the last transaction which took place. At this price someone sold yahoo stock and someone bought it.

The prices above for Yahoo are the prices direct from the exchange on which it trades (in this case the NASDAQ).

Answer 2

The "Market" decides the "actual" value (price) of a stock.

The price of a stock that you see quoted is simply the value (price) of the last trade (a purchase and sale - there are always 2 sides of every stock transaction) made on that stock.

If an investment firm is rating a Stock as undervalued or overvalued, that means that their analyst believes that the Market has valued (priced) the shares of that stock below what that analysts feels is the "value" of the company (stock).

Answer 3

When a stock is being launched then its the company.
After that the value is another way of talking about its price.
And price is determined by the simple laws of supply and demand which is why prices fluctuate.
Stock market prices will change as a result of many factors.
Global economics and world/international stability.The home country's economic performance and recently published economic data and lastly the company's likely future trading performance or that of the sector its in.
Stocks are bought on future expectation of income and or capital gain.
The brighter the prospects for any one company the greater the demand to invest in it and with supply fixed or few sellers in the market the price will rise.
When you talk about the stock market fixing the price it does so but on the market conditions we the public create

Answer 4

Actually, the final say lies with what are known as "Market Makers". Market Makers are the middlemen of every stock transaction. They "hold the book."

When you sell a stock, your broker routes the order to the "floor" of the exchange where it is matched up with someone who wants to buy the stock. If there is more interest to sell the stock than there are people buying it, the Market Maker has to buy it for his/her own inventory.

The Market Maker is not an investor per se so he/she does not want to own the stock. Rather than buying everyone's shares (when no one else wants to), he/she keeps dropping the price until either:

a) Other investors want to start buying it; or,
b) The selling investors no longer want to sell.

This is the "supply and demand" of the market. The company has no say in how its stock trades.

Computers are now taking over the roll of Market Maker, matching orders and using complex algorithms to decide whether to raise or lower the price.

Stocks go up in price the same way but, instead of the Market Maker buying the shares, he/she has to sell from his/her inventory and raises the price to protect himself/herself from running out of shares.

Money Makers make their money on the "spread" of every transaction - the difference between the "bid" and "ask" of a stock price.

Answer 5

A stock price is based on supply ans demand in the stock market. The public decides the price in the market place, OK

Answer 6

Wall street likes to see growth in companies, doesn't care much about value. Price of the stocks is not only related about how much the company is worth today, but how much it will be worth in the future. That is why stocks are measured by P/E ration which is a proportion of how many years will take to a stock to reach the price that you are paying. Companies with low P/E (Less than 5) are companies that are dying and investors tend to avoid as the growth potential in them is very shallow or the growth potential has not been appreciated (undervalued). . Companies with huge P/E (more than 50) are companies that are in very high demand and investors see huge growth potential and tend to overpay. Book Value, can also be another metric when a company is not making any profits and the company is worth more for what the tangibles they have, than the potential profits the company can make. Just like a Junk car, when you sell it to the junk yard they won't give your more than $100, but when they sell their parts, they make huge profits.

Answer 7

the stock market. many factors in the market set the final value of the stock. and it's everchanging.