Hacker News Reader

Hacker News

Comment by tyingq | Hacker News Reader

Parent Full thread

tyingq

What I was replying to:

"Yeah, iPhone sales are below expectations, but Apple's struggling? Hyperbole remains..."

The complaint was specifically the article's characterization that Apple is "struggling".

First sentence of the article: "As Apple struggles with sluggish iPhone sales and a falling stock price..."

falling-stock-price

View on HN

I have a naive question related to this:

Why does a company care what its stock price is? If I buy or sell a share of Apple, Apple doesn’t get any money from the transaction, right?

Why should a company be concerned about its stock price at all?

I’m not talking about when a company IPOs and sells shares, I’m talking about after that.

To the extent that you believe a company's primary responsibility is to it's shareholders, increasing the share price (over the long term) is the main thing a company is meant to do.

I would state it more broadly and say that it is the responsibility of the company to ensure a good return on the shareholders' investments. That could be by increasing the share price, but it could also be by paying dividends. Also, remember that a company's stock value doesn't necessarily reflect its true intrinsic value. Sometimes when a company is liquidated, it turns out that it was undervalued by the market. But more importantly, it may valuable to control the company in a way that is not reflected in the share price at all. Warren Buffet gave an example of this the board of the Washington Post in the 70's, when he was advising them how to invest the money in their pension fund. He said that for a newspaper specifically, it might make sense to invest in a printing company because of the benefits it might give to the newspaper to control the printing company. The value of owning the printing company might not directly be reflected in the in the financials of the printing company, but indirectly in the reduced costs or higher quality product of a different company.

Because when it's lower than expected, shareholders start meddling, sometimes in ways that counter company goals.

And in the extreme case, an undervalued company may be subject to a hostile takeover. Apple is somewhat protected by its sheer size, but at a P/E of 10, it's a quite attractive target.

The company doesn’t care so much as the employees, especially those who have a significant amount of comp coming from RSUs or other forms of stock, which these days is a large part of the workforce at big tech companies.

Struggling to meet high expectations isn't the same thing as generally struggling.

But saying that a company is struggling because it stocks price is falling is like saying that a dog is happy because it is wagging its tail. In other words, it is reversing cause and effect. A company’s stock price may be falling for any number of reasons, one of them being that the company is struggling in the market, just like a dog may wag its tail for any number of reasons, one of them being that it is happy.

You don't think they sit in board rooms speculating/struggling on how to get the stock price back up? Discussing potential non-root-cause fixes like buybacks, PR, etc? Whether it makes sense or not, company leaders do often fret about stock price separate from the actual drivers.

No, I don't think they do in most boards, unless the board members are individually dangerously exposed to drops in the stock price (Elon Musk cough). Apple more so than most other companies, is famous for taking the long view strategically, so I would be very surprised if drops in the share price in and of itself would cause them to alter their strategy. They haven't any of the previous times in the last two decades, when the stock dropped significantly.

Oh, thanks. Since there were two options, at first it seemed the earlier reply was concerning both.

Also, on the falling-iphone-sales - I also wonder how big the fall is; but I am conscious that journalistic reporting might use hyperbolic comparisons to an extreme.

Reply on news.ycombinator.com