how is the company affected by the changes in its stock price in the secondary market?



A company goes public (using an IPO) with the purpose of raising money. However, after holding the IPO (and pocketing the money) how is the company affected by the changes in its stock price in the secondary market? Also, what does a company gain by paying dividends to the shareholders?

One Reply to “how is the company affected by the changes in its stock price in the secondary market?”

  1. The company uses that money from the IPO to invest in projects to make more money. Sort of like if you borrowed money from a bank to start a business, except you can raise more money than you can borrow from a bank and you dont have to pay it back. The money goes into the business. After the IPO the company is supported by its earnings vis a vis the money invested. A wide range of investors now own the company. And they care about the stock price and the earnings. If the company is making a profit and has no opportunities to reinvest those profits in the business, then they may pay out some of those profits in dividends. Its a simple concept.





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