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
You are right that the company does not care directly. But the investors who bought the shares do care about the share price as they would want to sell them at a profit. And buying shares does entitle you to a part ownership of the company. Including a vote in the shareholder meeting. They can raise a vote to sack the CEO or any of the other executive officers, or they can include bonus targets for them in the budget. The shareholders are the people who control the company and make all the important decisions. The CEO is just a custodian for the day to day operations. So while the company does not care about the share price directly the CEO does want to keep the shareholders happy, and so he want to motivate the others in the company to make the shareholders happy, and that happiness is measured in share price.
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