It sounds like a obvious question but hear me out. Yes, I understand why stock price and how a company performs have a direct correlation. I do also understand that a company’s performance affects its stock price. However, I do not understand the other way around, especially when the shares crashes.
This is my understanding how stock works: when a company goes public, the company raises money from the public in exchange to the ownership of the company. Stock price going up doesn’t mean the company gains more money as the investment is already made. Stock price going down doesn’t mean it looses money as they do not have to pay back for the investment. So why do companies go bankrupt due to its stock price crashing (and possibly get delisted)?
In: Economics
dude it’s wild how a stock price dive can freak investors out and mess up a company’s plans. like future funding becomes hard to get if stocks tank. companies ain’t losing cash directly but perceptions change fast in the market. it’s a whole drama that impacts everything from hiring to growth. crazy how things work in finance right
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