If you've ever wondered how companies are affected by the rise or fall of their stock prices, keep reading.
A company issuing stock gets its money when the stock is issued. After that, when its shares are sold, the money goes from the buyer to the seller, not to the company. The stock price still matters, though. Executives and employees holding stocks or options benefit when the stock rises. If the company wants to issue more stock, it will want to do so when the price is higher rather than lower, to generate more capital for fewer shares. If the company is buying another company with its stock, the higher the price, the more bang it gets for each share.
Meanwhile, a company's falling stock price might make it more attractive to companies thinking of buying it. Stock is a form of capital, and companies often hold a chunk of their own stock. For some insights on how this happens, read about Oracle's (NASDAQ:ORCL) pursuit of PeopleSoft.
