Let's assume there's this random company (XYZ)--that few are aware of--is selling stocks and they're doing really well. If their stock price is at $50 and no one is buying, will it still go up?
Do stock prices only go up when people are buying?
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Let’s take a step back. Prices have their origin in the fact that there are buyers and sellers. If as you ask “NO ONE” is buying, there is no price that can be reported. No transactions will occur.
Prices only exist when there are transactions to report. The price is literally the last price at which a transaction occurred.
What you are describing is similar to what used to happen every night on a stock exchange that isn't open 24 hours (before after-hours trading existed), since after the exchange closes no one was buying or selling. If some incredibly good news came out about a certain company over night, the value of that stock would certainly increase, but the price of that stock was still what it closed at. Of course in the morning when the exchange opened the stock price would shoot up instantly to match its new value.
Your exact scenario is contrived though in that the price can't increase until someone finds out about the company and the fact that its stock is undervalued. If the company is public then everyone can know about the company, and if its private the point is moot since no one can buy the stock unless the owners decide to sell it. There's no such thing as a publicly traded company that isn't being tracked by someone and/or something.
The price of the stock can be reported at its bid or ask price or last trade price. No one needs to buy or sell the stock for the bid/ask price to change just like no one needs to buy merchandise from a vendor for them to change their prices.
"The price is literally the last price at which a transaction occurred." This is your accepted answer, and it is wrong.
Sorry Joe but this is unequivocally not true. Every exchange has different rules for how it displays a stock's price on its platform. Your answer is very very NASDAQ/NYSE specific and even those exchanges do not use the last sale as the price.
Most global exchanges give an aggregate of the previous day, others actually give some sort of weighted daily/weekly average. Often Euro exchanges implemented these rules to discourage end of market fixing - two steps ahead of us in the US. End of market fixing was a common tactic by seedy market manipulators that would buy a stock at an absurdly high price to inflate it for the next day's open.
So to answer a couple of questions:
Does this mythical company's stock price go up? Yes. This isn't something that normally happens though but it could. Let's say that company XYZ has 3 shares of stock in its whole company valued at 3 million a piece (this stuff happens in over the counter markets). So they are doing awesome. And buyers are putting bids in at 7 million for a share, but sellers aren't selling. That company's share price may be expressed as 7 million or more. So boom it could happen, it does happen, but not often.
Can a stock's price go up without another trade? Yes. If it is on an exchange that uses averages and stock XYZ had a couple of low sells at the end of the day it might not trade for hours and then be reported the next day to open at a higher price using the weighted average that the specific platform uses.
(I spent 10 years programming exchange buying -bot- systems for companies) Stock prices are set depending on the platform they are sold. The answers on this site do not take into the account of variance used in different global platforms. I can take an easy scenario. A company may ask for an exchange to halt trading on their company during a buyout scenario. The exchange may work with the company and find that company ABC will buy XYZ for double its currently traded price. It is up to the exchange how they will report it share price. Most US exchanges might just use last sale while other exchanges may use buyout share price. There are positives and negatives to all models - let me give you a hint though, the US exchange market is much more open to arbitrage and manipulation than our global counterparts.
XYZ is a publicly traded company. At the end of the day, the last trade is the closing price ($50). That price will not change until another transaction occurs and until then there will be no reporting of higher or lower prices.
While there is no trading, the bid and ask can fluctuate wildly or not at all. If I'm the the only one bidding to buy shares, I could bid $15. I will be the bid price until someone comes in at a higher price, say $35. The same could happen on the ask side at $55 or $75 or whatever. All of this posturing. They are meaningless offers since no trades occurred at those prices and the last trade at $50 stands until someone executes a trade at a different price.
By definition, if no transactions are occurring, then there is no "price". All we can say is what the price of the last trade was.
Someone could say what he might be willing to pay for the stock if he were interested in buying it. But if he's not interested in buying, that's a pretty meaningless number. If someone offered to sell him shares at that price, would he actually buy them? If not, it's not a real price.
A seller might say what he would hope to get if he could find a buyer, but hope and reality are often very different things.
Presumably an audit of the company's assets and analysis of their current sales, etc, could be used to calculate a theoretical value. But until you actually get an actual buyer and seller, that's just theoretical. Like someone compared this to what you could sell your house for after making improvements. Sure, if you bought the house for $100,000, and you spent $100,000 on remodeling, and someone has a formula somewhere that says that on the average remodeling increases the value of the property by 60% of the cost, then you could say that the house is now worth $160,000. But you have no assurance that anyone will actually pay that. Maybe anyone considering buying this house will think that your remodeling is awful and reduces the value of the house. Maybe someone will see it and decide it's the most beautiful home she's ever seen and will gladly pay $300,000.
It's also a stretch to say that NO ONE knows this company is doing well. Surely the people who work there and see hordes of customers snatching up all available merchandise have a clue that the company must be making money. Surely customers who see the crowds in the store every day have a clue. Suppliers know how much these people are buying from them. Etc. Maybe you could come up with a scenario, like the company makes its money by mining in remote parts of the world, they sell the ores in tiny quantities to each of a thousand different buyers, etc. But I think any such scenario would be far-fetched.
As others already explained, a stock price is normally determined by the actual sale of that stock.
An exception to this may be if something special happens, for instance a reverse stock split. This will have a significant impact on the price of 1 stock (but of course it is not the same stock as before the split, and does not influence the value of the company).
Though your question is specifically about increasing, a common situation where the stock price changes without a sale is actually when divident is paid. Of course this means a price drop.
Short answer - yes, if the stock is tightly held and anyone wants to buy.
Price is what you pay, value is what you get. (W.B.)
Are you buying or selling?
The value of what you hold is not dictated by the last sale, it is dictated by what you will receive when you do sell.
Market depth may show buyers willing to pay and how much. For penny stocks not traded daily this can be quite grim. You may be able to sell a third at 10c, another third at 4c and the final third at 2c. This depends upon your volume and the volume of the demand at these price points. There may also be fence sitters that jump in.
Low latency cancellations can reveal more about the market depth by exposing some of the fence sitters and other robo traders. Putting in an order and canceling it 20ms later to avoid a real trade can reveal more buyers.
A lack of trades can also be a problem for fund managers, who have necessary need to value units in the fund realistically as well as conduct a timely and orderly sell down if margin calls are triggered, say. A stagnant market is as bad in this case as a volatile one.
Exceptions to the rule are pending mergers/takeovers. The price of the target will generally jump to settle at a premium and rise slightly to the promised price according to prevailing interest rates and how far away the event is. trading may even be suspended prior to the jump. When EDS was acquired by HP this was a healthy increase in value and a relatively linear, shallow ramp.
You've asked a theoretical question, which can only really have a theoretical answer:
"Does a product no one is buying, actually have a value?"
That is, if no one knows about it, no one is buying it and it has no inherent value.
If the price is the value recorded from the last transaction, then this is not possible by definition.
If the price is the value for that somebody would agree to sell (as the price tag in the supermarket), it can be too high for anybody to make a purchase, and even further go up.
The reason may be that the owner would sell for the really high price but does not actually need and not especially want. If the number of owners is limited, if they make a tightly knit group with a group thinking, it is possible for all of them to be in consensus with this opinion.
I believe you are confusing price with value. Stock has a value, it represents a percentage of ownership, and thus has an absolute value at any given momement in time. Stock has various prices because various people own it and they have different expectations as to what the value will be in the future and different needs to exchange it for something else.
The value changes as the company buys, sells, creates and uses assets. Price can be referred to in the past tense, and that is what was paid for it or in the future tense, which what someone is willing to sell/buy it at.
Both the price and the value can change overnight without someone selling or buying stocks.
Basically, the answer is no. Very roughly, stock prices go up because there are more people who want the buy than who want to sell, and vice versa. And, the amount that the price rises is generally roughly proportional to the amount of buying vs the amount of selling.
There are a lot of technicalities that make what I said not 100% true, as you will read in the other answers. But, I think this is more along the lines of what you actually are trying to ask about.
Thank you for your interest in this question.
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