The value of a stock is based on the value of the company, but why that correlation?
Only thing I can see linking them is dividend, but that is just 3-4% Annually. What is preventing it from becoming a game of share market, like happens in crypto?
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Shares are literally equal portions of a company. Share price is the market valuation per share.
And since all cumulative shares add up to 100% of the company, the company’s market value is literally the cumulative market value of all the shares.
Company market value = total shares x current share price
Share price is initially started at IPO. If the market thinks this is overvalued (e.g. compared to similar companies), they will hold off from buying it. If current owners start selling off then there will be a crash.
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