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 stocks represent ownership in the company, fractional though it may be, and the people who own the stocks care about stock prices – because those people like to be able to sell those stocks or use them as collateral for loans as a form of income. Companies are legally obligated to act in a manner that benefits stockholders – although defining “benefit” is wiggly enough for companies to justify, say, doing something that lowers the stock price in order to preserve the integrity of the company.
Like, Boeing is getting in a lot of trouble right now because they cared more about their stock prices than aircraft safety, which is causing the stock price to *drop*. Company leadership can (and should) justify actions that don’t immediately improve stock price as long as the actions are still in service of improving the company.
Point is, stockholders have the authority to dictate what a company does, to the extent of the fraction of ownership that their stock represents.
Companies also care in a more nebulous sense because *if* the company should need more cash on hand, they can sell more stock. If the stock price is high, they can sell less of the stock to accomplish whatever goal they’re aiming for. Stock price is also a *very very general and not at all specific or reliable but kind of sort of a reasonable* indicator of company health. When a stock price drops, it’s probably because something is going wrong, and vice versa. That is not at all even remotely *always* true, but it’s true *enough* that if you want a quick idea of how a company is doing, you can look at their stock price trends.
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