Comment by freeopinion | Hacker News Reader

Comment by freeopinion | Hacker News Reader

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I'm willing to expose my complete ignorance by questioning this wisdom.

I get that a startup wants a high stock price so they can raise as much money as possible while giving up as little control as possible. Of course there are other circumstances where corporations' best option for raising cash is to sell shares. So in those circumstances, this reasoning still holds.

But what about when I've gotten past funding shortages and I'm a successful company and I want to invest in myself and take back some ownership? Now I have to pay some premium because of something that has nothing to do with the value of my company?

Or what if I'm ok not taking back ownership. I'm content to just stay with 60% ownership or whatever? Why do I care what the share price is or what volume of sales is occuring on the stocks around me?

In short, high stock prices only benefit me when I'm selling. So this reasoning baffles me for anybody with an ownership mentality.

I admitted upfront that I was exposing my ignorance. I'm willing to learn from anybody who will show me a bigger picture. But I dread a bigger picture that assumes that future success at any level can only be obtained with leverage.

> Why do I care what the share price is or what volume of sales is occuring on the stocks around me?

Like it or not, your job as a manager in a company is to run that company for the people that own it, same as if you manage a local grocery store for your neighbour Jeff that owns it. Jeff will be happy if his store appreciates in value the same way the shareholders of the corporation (its owners) will be happy if it goes up in price.

So as an employee of the company (the CEO is one too), you care because your job is to care, and in the case of senior management you also have a legal duty to care and the company can be sued if you don't.

>Now I have to pay some premium because of something that has nothing to do with the value of my company?

The value of your company is decided by the market participants with supply and demand. There's the academic idea that your company can be valued by your profits and losses, but the truth is, those more less to do with with the value of your company than the potentially demand for your shares. In other words being in an ETF may be more relevant to your stock price than the debt on your balance sheet.

>* Why do I care what the share price is or what volume of sales is occuring on the stocks around me?*

You might not care, but the other 40% might. It's tempting to think the other 40% is just amorphous group of shareholders, but it's likely it includes your business partners, or employees who will want to see the stock rise so they can eventually sell. And those partners and employees, upon learning that you aren't maximizing their shares may choose to leave, ultimately damaging your business.

In other words, once you have multiple owners, as long as the green line goes up, everyone is incentivized to continue doing well.

Wouldn't the share holders care more about the profits of the company which are then being given as dividends instead of the price they can trade the share price at?

Isn't the amount of profit the company is making (and how that will change) what matters and not what its share price is?

Most companies don't pay out dividends. Google paid out its first dividend in 25 years and it's only 20 cents a share. Your wealth increases faster from the share price going up vs a dividend and it's not even close. Couple that with the fact that you don't have to sell - you can just borrow against your shares to get liquidity, most are far more incentivized to care about the stock price.

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