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
ELI5 answer:
Your question is exactly the reason they have to care for it. The stocks are structured in a way that the people running the company are incentivised to keep it valuable.
Their own salary is tied to it.
They themselves receive a part of salary as stocks.
Their stocks are tied for some time in the market so it’s in their interest to keep the value up for their own sake.
And most important of all, in most cases “company” owns more stock than what’s already out there. So if the price goes down, retail users lose money, but the company loses more.
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