As I understand it, once a company raises, say $5 billion in an IPO, the shares are sold and they get the money.
The shares are already with the public now. Why is it so important for public companies to grow their share price further every quarter? Why not focus only on the final profit margins?
In: Economics
“The company” is often a way to refer to the shareholders and C-level people. (CEO, CFO, CCO, etc)
They care deeply about the stock price because being a shareholder means they have a large amount of stock owned in the company. So the stock price being higher than before is actively adding (usually a lot) of money directly to their pockets. Someday they’ll want to cash out, and the higher the stock price is at that point, the more of a payday they get… sometimes talking about tens or hundreds of millions.
This is why when companies go public they often go downhill and stray from their original values – profit is a prime driver of stock price, and stock price matters above all else to the people at the top.
Latest Answers