I guess I understand supply and demand – I have something I judge more valuable, I’ll ask for a higher price to sell it for.
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I wonder how company stock is valued – Is it enough to have one single person ask for a certain price for a stock to change its value?
I guess I’d like to understand it in terms of a company that only has 10 shares. If I’m the owner of one, how impactful am I in changing its price?
In: Economics
A share of stock is only worth what someone will pay for it. That usually relates to the actual value of the company itself, but not always.
So, if you have stock in a company that people want to buy and believe the price will increase in, the price likely will increase because people are buying at the higher price in order to make money for that potential increase. Once it rises enough, people start to think that that’s as much as it will increase and they start to sell the stock that they had. Once enough people start selling, the stock levels out or starts to dip. Then, even more people see that it’s starting to dip and start selling their shares thinking that it’s going to be the new trend. There are other people who just sold at the peak and they see this dip as a temporary thing and they start buying in again believing that it’s going to go back up. The cycle continues with people buying and selling, some making money and others losing.
If you are holding all 10 shares or even just one of those 10 that exist of a stock in a company with no one buying or selling, there is no value to the shares until you sell. Once you sell, whatever price you sell it is the value of the stock. If you or the other person sells more stock for a different price, that is the new value.
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