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This question already has an answer here:

I understand that it is in the interest of a company to sell shares initially: It is a good way to get money to invest and grow.

But once the shares are “out there”, why should the company care about their value? Is there any concrete benefit to the company of its own shares rising in price?

(This is, in a way, the dual question to this question.)

marked as duplicate by Chris W. Rea, JTP - Apologise to Monica Jun 2 '15 at 12:15

This question has been asked before and already has an answer. If those answers do not fully address your question, please ask a new question.

  • Re: "initially" is your clue. My older answer in a nutshell: Companies may first go to market through an IPO (Initial Public Offering), but they aren't limited to raising money that single one and only time. While the IPO tends to be a headline event that's easy to notice, secondary offerings and takeover proposals that use company stock as currency are more frequent. – Chris W. Rea Jun 2 '15 at 12:12
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    I'll also add that the directors of a corporation have a duty (in the legal sense) to their shareholders, similar to what I wrote in this other answer, and completely ignoring the share price could constitute neglect of that duty. – Chris W. Rea Jun 2 '15 at 12:19
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After the initial public offering, the company can raise money by selling more stock (equity financing) or selling debt (e.g. borrowing money). If a company's stock price is high, they can raise money with equity financing on more favorable terms. When companies raise money with equity financing, they create new shares and dilute the existing shareholders, so the number of shares outstanding is not fixed.

Companies can also return money to shareholders by buying their own equity, and this is called a share repurchase. It's best for companies to repurchase their shared when their stock price is low, but "American companies have a terrible track record of buying their own shares high and selling them low."

The management of a company typically likes a rising stock price, so their stock options are more valuable and they can justify bigger pay packages.

  • Also, if stock price drops too low, takeover becomes too easy. Remember, shares have voting rights. – keshlam Jun 3 '15 at 5:03

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