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So, I'm a dumb babby. As far as I understand, there's a company like Lincoln Consolidated Steel and Sons Co. Inc. LCSSCI makes paper clips. It buys a lot of metal, makes it into clips, and sells clips. Money out, money in, and surplus value of labor is collected by the fat cat. And if LCSSCI sells shares, the money gained from those sales go either into investing into the company or letting the fat cat cash out. But when those shares are re-sold, the money just goes to the previous owner of the shares, and not LCSSI, right? So what does it matter if the CEO of LCSSI goes on a gamer-word rampage on Twitter, tanking the share price? How does that impact the business of turning a bunch of metal into a bunch of paperclips? As far as I understand, once the shares are out, nothing that happens to them impacts the ability of company to do things unless the shareholders order the C-levels to cannibalize stuff. Halp.
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Jan 26, 2023 07:05
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| # ? May 3, 2024 21:15 |
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The collective value of all shares is what the company is "worth" (aka "market cap"). It matters in the same sense that the value of your house matters...depending on when or if you plan to sell it. It doesn't affect the overall business necessarily, but it's a good indicator as to what the market thinks the business is worth. The market is often wrong. For instance, the full market cap (the value of all shares combined) might actually drop below the real assets the business owns (property, inventory etc) so a low share price means you can buy into the company at a discount. A high share price above and beyond a company's assets means shareholders believe the future value of the company is worth buying now. In short, it doesn't matter to underlying business. A business might capitalize on a low share price by buying back shares and selling them later, but that's more of a byproduct of strategy than an actual strategy itself. quote:surplus value of labor is collected by the fat cat. The labor theory of value is wrong, btw.
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Jan 26, 2023 23:52
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The people who own the shares want them to be worth more and they get to vote for who’s on the board of directors.
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Jan 27, 2023 05:36
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JcDent posted:So, I'm a dumb babby. The theory is essentially that by voting for the BoD to oversee the CEO, the owners of the company, the shareholders, have control over management, and thus since management reports to the BoD, they will then act in the interest of the shareholders, i.e. either increasing the value of the shares of the company, owned by shareholders, or else by distributing capital back to the owners of the shares, in the forms of dividends. In practice there are innumerable problems with this theory. The interests of the BoD and the other shareholders is not perfectly aligned, and even the interests of specific shareholders may differ (some may want to sell shares now, some later). The people who make up boards of directors and management are not entirely indistinct groups. People who serve on boards often serve on other boards, etc..
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Jan 27, 2023 06:25
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to an investor, share price doesn't really matter. growth of share price is what matters to an executive, whose compensation is mostly in shares, the price matters more
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Jan 27, 2023 07:03
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If price don't go up I get mad that's why.
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Jan 28, 2023 17:36
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| # ? May 3, 2024 21:15 |
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Thanks for the answers!
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Jan 31, 2023 20:10
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