Let's say there's a new company set to IPO, they are offering 1 Million shares at $20 a share in the hopes of raising $20M for new equipment, employees, etc. If only 300K shares sell the first year of it's IPO, what causes the price during that time to fluctuate even though there are still outstanding shares? Who decides to bring the price per share up or down? If all 1M shares are sold at IPO, what causes the price to go up or down -- is it simply supply and demand?
2007-03-20 07:15:44 · 5 answers · asked by bigmacfann 1 in Business & Finance ➔ Investing
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2007-03-20 07:20:02 · answer #1 · answered by Tellin' U Da Truth! 7 · 0⤊ 0⤋
There are two parts. As you said of the company, "in hopes of raising $20 M", and "If only 300k shares sell."
Why would anyone want to buy into that IPO? There has to be some perception of value, some hope for gain, or people won't buy. But how much value? Who decides that?
Are we all agreed that Blockbuster Video (BVI) is worth $7.09 today? Nope, over 6 million shares were sold and last I saw they were trading at $6.69. So what is Blockbuster worth? Good question, because news is that a big shareholder was forcing out the CEO thinking that this current boss is the reason the company wasn't worth more.
Are we all agreed that Archer Daniels Midland (ADM) is worth $34.18 today? Nope, over 13 million shares were sold, and last I saw they were trading at $35.30. So what is ADM worth? Good question, because talk is someone is wanting to buy them out.
So what defines value? People selling give their asking prices. People buying place their bids. Are they the same number? Sold! Do the numbers disagree? Well, then a specialist, a market maker, starts changing the price he offers to buy or to sell at. No takers? Then how about x? Find an agreement? Sold! No takers? Then how about x-something? Etc. Yep, supply and demand, although some of the supply and some of the demand is like a friend introducing friends and starting a conversation. Still, the real issue is value. Just what is that company worth? Watch and see.
2007-03-20 14:47:24 · answer #2 · answered by Rabbit 7 · 0⤊ 0⤋
The fact that unsold shares are less likely, since firms have underwriters who contract with the enterprise to purchase all remaining shares of the company. The number of underwriters depend on the firms market value.
Share price movements are dependent on so many variables that are directly or indirectly linked to the system. Supply and Demand decide the big part of the cake.
For instance, if the firm performs well i.e. EPS-earnings per share, DPS-dividends per share, ROCE are of good and great values, share prices tend to go-up since the demand for the shares soar. If the firm under performed, lower revenue generation, less sales, company's stability is questionable, the share prices tend take the downward slope from the peak, since less demand for the share and over-supply of it. (Shareholders find this company less profitable or loss generating, therefore they put their share for sales, and may result in little interested parties.)
There are so many factors that decide share prices.
2007-03-20 14:31:34 · answer #3 · answered by monkeymorebiz 4 · 0⤊ 0⤋
It is impossible to sell just 300,000 shares in the first year.
When you go public the entire number of shares (1,000,000 in this case) are bought by the Underwritters.
They sell the shares to their customers and to other companies.
If they only sell 300,000 then they have to buy 700,000
Yes. It is simply supply and demand.
2007-03-21 00:14:31 · answer #4 · answered by Anonymous · 1⤊ 1⤋
it all depend on what stock that gains more at the end of the day like lets just say you want to invest $100.00 in walmart stock and have a good day you may gain no more than $50.00 but the next day it might drop. so the main thing is to watch your stock
2007-03-20 14:26:46 · answer #5 · answered by Erik P 1 · 0⤊ 0⤋