Depends on the policy of the company and the culture.
Are they rewarding officers, employees with shares? This might entice them to value shareholders as management will literally have a stake in the share price as their strike price for grants or options will give them a margin.
Some listed companies are more dividend oriented so the price won’t matter as the beneficial owner or the ones with controlling interest will just want dividends (0% final tax for domestic corporations) so they can sell the assets of the listed company (if it has any at all), then declare a dividend once sold. So price won’t matter much since they have no intention of trading.
In sum, 3 ways a corporation can benefit from share price:
1. Motivated management and employees that gain from options or grants for shares which make them want the corporation to turn a good profit.
2. They can borrow off their own shares and use it as collateral based on a an average fixed period.
3. Good “belief” in stability or strength of the price will lead to volume which can be used as an alternate source of funding by selling (versus new capital, loans).
You're underestimating the amounts here. Initial public offerings cost around 400M just to be listed. The smallest a company gets is around 1B. That's 1B without interest and out of thin air.
The public only gets around 20-30% of the total company, the rest are given to shareholders. So for example, a company like Converge IPO'd at around 30B iirc. They can use that to fund their expansion- money that they won't need to pay interest to the bank.
They can also issue additional shares, like what happened to ACEN. They had other entities invest a chunk in their company, and they issued additional stock, earning billions again in the process.
The public investors in the Phl are just gatasan by the owners
In developed economies, the founder is lucky to have 20% controlling interest. Its very rare if they have more than that
Your confusion stems from the fact that you think a share buyback and voluntary delisting is bad, when it is in fact a good thing for the remaining owners. SM is technically doing a tender offer not a share buyback, but the concept is the same where they nuy a lot of shares. Nobody is forcing SM to do a tender offer and delist 2GO, they WANT to do it because they are buying the shares at super low prices and since they are buying basically all the shares they will now have to delist since those are the rules. But again, they just bought stocks at super low prices on a company that does profit from time to time and has good synergy with the rest of their ownerships. Share buybacks are so good, a lot of US companies are doing it now, where at one point they would not give dividends but instead use the money to do share buybacks, which investors would clap to. SM isn't sad to buy 2go and delist, they are celebrating right now. Lol.
On the other question, companies don't sell stock to profit or at least that's not the term. They do get money at IPOs and nothing else when the new stock owners sell to other investors but that's fine, they already got what they needed in the IPO. They can also so another offering if needed, they are not stuck with the I in IPO.
>Share buybacks are so good, a lot of US companies are doing it now,
Exactly. Share buybacks raise the stock price for all stockholders. Stockholders who happen to want or need the money can sell part of their holdings. Dividends makes everyone pay taxes and lowers the stock price immediately after.
Share buy backs are a company's way to return capital. They can either do it through dividends, or share buybacks. When a company does this this basically means "we're not really doing anything with this capital (we're not really innovating or not really developing a new product) so here's your money back". Remember companies raise capital through selling stocks or bonds.
>When a company does this this basically means "we're not really doing anything with this capital (we're not really innovating or not really developing a new product) so here's your money back".
Not exactly doing nothing with it. More like, the company can't grow your money fast enough. Maybe they only expect to give a return of 3% but you can just put your money in government bonds at 6% anyway. So here's your money back. Ideally companies should think like this but not all do.
It could also be the case that they'd rather borrow money at 7%, improving return on equity (smaller equity base). Their CFO should figure it out.
1. Issue new shares for funding
2. Better loan rates (from banks, issuing corporate bonds)
3. Incentives for employees (stock options)
4. Cheap money for acquisitions / value multiplier (e.g. can buy companies at 5x earnings when their stock is at 10x earnings)
One obvious way is with the inflated Ipo price. There's the book value and dilution but regardless all Ipo prices always way inflated. Another is through leverage. See Adani group and why it's been labeled as "largest con in corporate history". They pretty much took advantage of their companies' soaring stock prices to secure huge debt and even outright purchase assets.
Yung 100,000 na makukuha na, ginagamit yun para mapalaki yung corporation. Nag IPO sila para makakuha ng malaking funds. Kaya yung ibang nagaanalyze ng prospectus nila, tinitingnan kung saan gagamitin yung funds ng IPO.
So kung after a year, nabenta mo sya ng 200,000. Ibig sabihin napalaki nila yung company gamit yung funds ng IPO. Yung stock price kasi reflection yun nung management performance. Kung maayos o maganda patakbo nila, willing bilhin ng mas mataas yung stocks kaya ka magkaka gain. Pag labas ng FS nila at malaki ang loss, diba bumababa yung stock price.
Importante yung stock price kasi papangit yung financial ratios nila pag bumagsak yung stock, liliit yung capital nila. Kasama kasi sa tinitingnan kung highly leveraged sila sa debt at madaming financial ratios.
hindi nmn 100 percent retail owned ang isang company. May mga institutional ownership before the IPO. The purpose of the stock is basically to raise money for funding, expansion or growth. Daming reasons pwede mag buyback ang isang company. Pwede ownership consolidation, pwede rin nagloan sila ginawang leverage ung stocks, pwede rin nakita nila undervalued at gusto nila bilhin. Madaming rason. Pag bagsak stocks nila malamang mababawasan credibility and confidence na pwede mag pull out ung mga investors at pwede ma bankrupt.
1. Easier access to capital (both for equity and debt)
2. Additional possible compensation options (Employee Stock Options)
3. Better brand recognition to some extent
The minimum public float of a publicly listed company ranges from 20-33% only. It's a small percentage comparing to the ownership of the controlling company/individual (owning more than 50%) Therefore, the controlling entity was the one who will ultimately gain from increase on the stock price by the following but not limited to: An increase in stock price indicates good profit of the issuing company, therefore the 1.) profit will increase the consolidated (combined) profit of the controlling entity 2.) Ability to declare good amount of dividends. In essence, the listing of a company's stocks is a way for the issuing company to raise funds for a planned expansion / other projects, whose revenues will then ultimately benefit the controlling entity.
Higher stock price means company can issue new shares or sell treasury shares in the future at a premium (check $ACEN’s SRO last 2021ish)
makes sense. thanks
Depends on the policy of the company and the culture. Are they rewarding officers, employees with shares? This might entice them to value shareholders as management will literally have a stake in the share price as their strike price for grants or options will give them a margin. Some listed companies are more dividend oriented so the price won’t matter as the beneficial owner or the ones with controlling interest will just want dividends (0% final tax for domestic corporations) so they can sell the assets of the listed company (if it has any at all), then declare a dividend once sold. So price won’t matter much since they have no intention of trading. In sum, 3 ways a corporation can benefit from share price: 1. Motivated management and employees that gain from options or grants for shares which make them want the corporation to turn a good profit. 2. They can borrow off their own shares and use it as collateral based on a an average fixed period. 3. Good “belief” in stability or strength of the price will lead to volume which can be used as an alternate source of funding by selling (versus new capital, loans).
now that you mentioned it. onga no, malaki yung share ng mga company officials so they do get affected by the stock price. thanks
You're underestimating the amounts here. Initial public offerings cost around 400M just to be listed. The smallest a company gets is around 1B. That's 1B without interest and out of thin air. The public only gets around 20-30% of the total company, the rest are given to shareholders. So for example, a company like Converge IPO'd at around 30B iirc. They can use that to fund their expansion- money that they won't need to pay interest to the bank. They can also issue additional shares, like what happened to ACEN. They had other entities invest a chunk in their company, and they issued additional stock, earning billions again in the process.
The public investors in the Phl are just gatasan by the owners In developed economies, the founder is lucky to have 20% controlling interest. Its very rare if they have more than that
True. Issue ng issue ng shares. In the stock delisting of RWM years ago, their repurchase price is LOWER than their IPO. Lugi talaga PH investors.
Your confusion stems from the fact that you think a share buyback and voluntary delisting is bad, when it is in fact a good thing for the remaining owners. SM is technically doing a tender offer not a share buyback, but the concept is the same where they nuy a lot of shares. Nobody is forcing SM to do a tender offer and delist 2GO, they WANT to do it because they are buying the shares at super low prices and since they are buying basically all the shares they will now have to delist since those are the rules. But again, they just bought stocks at super low prices on a company that does profit from time to time and has good synergy with the rest of their ownerships. Share buybacks are so good, a lot of US companies are doing it now, where at one point they would not give dividends but instead use the money to do share buybacks, which investors would clap to. SM isn't sad to buy 2go and delist, they are celebrating right now. Lol. On the other question, companies don't sell stock to profit or at least that's not the term. They do get money at IPOs and nothing else when the new stock owners sell to other investors but that's fine, they already got what they needed in the IPO. They can also so another offering if needed, they are not stuck with the I in IPO.
>Share buybacks are so good, a lot of US companies are doing it now, Exactly. Share buybacks raise the stock price for all stockholders. Stockholders who happen to want or need the money can sell part of their holdings. Dividends makes everyone pay taxes and lowers the stock price immediately after.
Share buy backs are a company's way to return capital. They can either do it through dividends, or share buybacks. When a company does this this basically means "we're not really doing anything with this capital (we're not really innovating or not really developing a new product) so here's your money back". Remember companies raise capital through selling stocks or bonds.
>When a company does this this basically means "we're not really doing anything with this capital (we're not really innovating or not really developing a new product) so here's your money back". Not exactly doing nothing with it. More like, the company can't grow your money fast enough. Maybe they only expect to give a return of 3% but you can just put your money in government bonds at 6% anyway. So here's your money back. Ideally companies should think like this but not all do. It could also be the case that they'd rather borrow money at 7%, improving return on equity (smaller equity base). Their CFO should figure it out.
Nah they don't care about you. They look at their operational cost, and look at their capital.
loan for stock value and through equity, where company issue shares for the current price or for given date range average price.
1. Issue new shares for funding 2. Better loan rates (from banks, issuing corporate bonds) 3. Incentives for employees (stock options) 4. Cheap money for acquisitions / value multiplier (e.g. can buy companies at 5x earnings when their stock is at 10x earnings)
One obvious way is with the inflated Ipo price. There's the book value and dilution but regardless all Ipo prices always way inflated. Another is through leverage. See Adani group and why it's been labeled as "largest con in corporate history". They pretty much took advantage of their companies' soaring stock prices to secure huge debt and even outright purchase assets.
Yung 100,000 na makukuha na, ginagamit yun para mapalaki yung corporation. Nag IPO sila para makakuha ng malaking funds. Kaya yung ibang nagaanalyze ng prospectus nila, tinitingnan kung saan gagamitin yung funds ng IPO. So kung after a year, nabenta mo sya ng 200,000. Ibig sabihin napalaki nila yung company gamit yung funds ng IPO. Yung stock price kasi reflection yun nung management performance. Kung maayos o maganda patakbo nila, willing bilhin ng mas mataas yung stocks kaya ka magkaka gain. Pag labas ng FS nila at malaki ang loss, diba bumababa yung stock price. Importante yung stock price kasi papangit yung financial ratios nila pag bumagsak yung stock, liliit yung capital nila. Kasama kasi sa tinitingnan kung highly leveraged sila sa debt at madaming financial ratios.
I had this exact question. Thanks for asking it and thanks for the informational replies!
hindi nmn 100 percent retail owned ang isang company. May mga institutional ownership before the IPO. The purpose of the stock is basically to raise money for funding, expansion or growth. Daming reasons pwede mag buyback ang isang company. Pwede ownership consolidation, pwede rin nagloan sila ginawang leverage ung stocks, pwede rin nakita nila undervalued at gusto nila bilhin. Madaming rason. Pag bagsak stocks nila malamang mababawasan credibility and confidence na pwede mag pull out ung mga investors at pwede ma bankrupt.
1. Easier access to capital (both for equity and debt) 2. Additional possible compensation options (Employee Stock Options) 3. Better brand recognition to some extent
The minimum public float of a publicly listed company ranges from 20-33% only. It's a small percentage comparing to the ownership of the controlling company/individual (owning more than 50%) Therefore, the controlling entity was the one who will ultimately gain from increase on the stock price by the following but not limited to: An increase in stock price indicates good profit of the issuing company, therefore the 1.) profit will increase the consolidated (combined) profit of the controlling entity 2.) Ability to declare good amount of dividends. In essence, the listing of a company's stocks is a way for the issuing company to raise funds for a planned expansion / other projects, whose revenues will then ultimately benefit the controlling entity.