How the stock market relates to its listed companies

15th Jan '21 by pjohn005

3 comments 388 reads

Hi All,

I'm trying to increase my understanding of the stock market and how it relates back to the listed companies so I was wondering...

If a given company's share price continues to sink despite that company continuing to do well and be very profitable, I would imagine the main reasons that company would have to care about its poor share price are:

Reputational
Would make it more difficult to issue any more shares

I'm sure there is more to it than that so I would be keen to hear others' thoughts.

I don't have any particular companies in mind though.

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HumourMe

15th Jan '21

Vulnerable to takeover, capital raising (you covered already in issuing new shares), staff retention and management motivation (via share incentives).

Silver Moon

16th Jan '21

It could be that some people know more than they are willing to share and are quietly getting out while a cover-up is going on. Small shareholders may be kept in play by strong dividends.

Silver

Here's an example: https://unitetheunion.org/news...

doug2500

My biggest concern (if it's not an imminent profit warning) would be that management take their eye of the ball trying to 'correct' the share price rather than running the company. This would be due to poorly designed remuneration policies, which is most of them.

How the stock market relates to its listed companies

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Pjohn005

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