eli5 why do companies with billions in the bank care about stock prices. Wouldn’t they be financially fine if the stock lost money?
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What kind of company has “billions in the bank”?
If a company just sits on billions and don’t do anything with them that’s a really bad company.
Their “billions” is usually made up by stock as well one way or another.
And a company has owners, the owners own the company through stocks. So the owners will lose (potential in some ways) money if the stocks lose value. A company in itself doesn’t really have any wishes at all, it is the owners that control it.
Their incomes and cash flow can still be great even with lower stock prices though. But in general if stock prices drop the reputation takes a hit and they might lose some customers. If they need more money to continue to expand/develop it is usually harder to find new investors and you have to give up bigger parts of the company to get the same amount of money from investors that are still interested.
Usually (although this seems to be a bit less true lately) the stock value is also based on current and expected performance. Although Drops sometimes happens more as a reaction to the bigger picture rather than changes in the company itself it still usually has some impact. Recessions, pandemics, increased interest rates and so in tends to impact most companies negatively compared to future expectations.
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