As I understand it, when people buy a share of stock, the price goes up. When people sell it, the price goes down. So what does this have to do with the company itself that this stock represents? For example, if a bunch of people wanted to make Apple’s stock price go down, they could just agree to sell their shares. So what does the actual stock price have to do with the company?
In: 5
Some points linking stock price to the company:
* Stock is the company ownership. The job of a (publicly listed) company is to maximise its shareholder’s wealth – which is arguably the general objective of any profit-making company.
* The company CEO’s job therefore is to satisfy the shareholders. The CEO also tends to get paid in shares. Since the CEO runs the company, affect on long-term market value of the company tends to influence the strategic direction the company goes in. – If the shareholders aren’t satisfied, they can vote to replace the CEO with somebody else.
* A company sells shares ie. portions of its company, in exchange for funding which goes into its operations. It’s in the company’s interest therefore that they can get as much money per share as they can.
>if a bunch of people wanted to make Apple’s stock price go down, they could just agree to sell their shares
This feels like a tangent away from your original question. But this sounds like market price manipulation, which is generally illegal.
If a large shareholder was doing this, and it was obvious they were doing this in order to acquire more shares, this would make the company look unstable – and so would deter other investors. If the market is deterred from the company then the price won’t go back up.
Latest Answers