From my little understanding, company’s issues stocks to raise money. So once the company’s sell those stocks, why does it stock prices matter to them?
In: Economics
Because the people ‘in charge’ of the company own the stock.
At a basic level, suppose I am a one man company. I want to raise some money. So I create ‘100 shares worth $100 each. ‘ I give 40 to myself. I sell 30 Bob and 30 to Steve. By doing this, if there is ever a vote on what the company should do, I get 40 votes, Bob gets 30, and Steve gets 30.
Now what do Bob and Steve get out of this investment? They had to pay for the stock, unlike me. Well, Bob and Steve hope to drive the stock price up, so they can sell their shares and make some money. So if they drive the stock price up to $500, they make that money. Alternatively, they can take a dividend from the company.
Companies also try to ‘give’ important employees shares so they are incentivized to also raise the stock price. Normally VPs, Directors… would be given stock.
It’s not perfect, but that’s the idea. I was regular employee at various firms and often got stock options. I wanted the stock price to go up too, but I had far less of an impact to make it go up or care.
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