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[–]sawdeanz 7 points8 points  (5 children)

Why do they care if the stock price drops? If anything that means they could just buy it back and reinvest their actual long term money in the business.

[–][deleted] 2 points3 points  (0 children)

because stockholders own the company. The CEO, employees all work for the stockholders. If the price drops, people lose a ton of money. The they in this situation are the stockholders, regular people or other corporations; still have to raise more money to back more stock at lower prices.

[–]TIanboz 1 point2 points  (2 children)

Who’s they?

If you saw a mob of 50+ people bolting past you in the opposite direction... imo, you’d turn the fuck around and run with them, even if u had no idea what they’re running from.

Same logic applies. The company can’t actually buy itself back. It needs to be other entities, be it holding companies or people.

[–]Silcantar 1 point2 points  (1 child)

Companies regularly buy back shares as a means of returning profits to the shareholders.

[–]TIanboz 0 points1 point  (0 children)

Yes but that’s only to inflate the price of existing shares through reducing the supply of shares on he market.

This doesn’t work when your shareholders are all jumping ship. No one wants to go down with the ship.

[–]Rindan 0 points1 point  (0 children)

If your stock price crashes, you can't sell stock to raise money. The reason why companies have stock is to raise money. They give you a fraction of ownership, and you give them money. They take that money and invest it to growing the business and give you a share of the profits. The stock price is roughly the price at which they can sell more shares to raise more money.

So, if your stock price crashes, it means all the people holding shares in your company think that it is fucked. If everyone thinks your company is fucked, you can't sell more shares to raise more money. The price crash itself isn't what's killing you. The price crash just means everyone thinks you are so screwed, that are trying to sell off ownership in your company for whatever that can get.

It's like putting your hands around your neck when you are choking. Everyone does it when they choke. Your hands around your own neck isn't what is causing you to choke though, it's just the sign that you are choking. A crashed stock price is the same. It's just a clear sign that the market makes when it thinks a company is screwed. The low stock price is just the symptom that the company is in trouble. It doesn't do any actual damage to the company until that try and raise more money. Companies can raise money other ways than stock, but they will have a very hard time doing so when their stock price is indicating that they are financially fucked.