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+--- Thread: What are two reasons that a company should be concerned with the trading price of its stock? (/thread-43573.html)
What are two reasons that a company should be concerned with the trading price of its stock? - Ronnie - 11-19-2012 02:24 AM
- hrblockerrolquinn - 11-19-2012 02:32 AM
Dear R: A lot of employees own stock and to keep them happy you want your stock to always show some gain for the employees.
In order to raise money a company will sell(issue) stock if the company is a good company and their stock is a good performer it will always be able to attract buyers.
- Fundu Vishy - 11-19-2012 02:32 AM
Ronnie,
While as such, there is a very little value the Company gets out of the trading price of a stock, it is still important for the company to be concerned with the price. Some of the reasons in my view are:
Trading price of a stock generally takes in to consideration the future prospects of the Company. Hence, it is an indicator of market acceptance for the strategies being implemented by the Company for its future growth. Hence, the Company gets to know the 'market opinion' in advance of its Strategies which are going to impact its business in the future.
A Company is expected to have multiple stages of capital requirements. Hence, it is not that a Company once listed should forget about it. For its next level capital requirements, the Company needs to tap the same market or at least the prices discovered by the market becomes the base for next level capital rising.
One more reason is that the promoters of the company and in most cases even the employees of the company have a stake in the company and their wealth is measured by the price of the stock.
Trust this clarifies the position.
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Fundu Vishy - Your 'Mutual' Friend
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