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I some questions about the stock-market. What decides the price of things in the stock-market? If it is demand, is there anyone making offers for the things in the market?
A company's worth - its total value - is its market capitalization, and it is represented by the company's stock price. Market cap (as it is commonly referred to) is equal to the stock price multiplied by the number of shares outstanding.
For example, a stock with a $5 stock price and 10 million shares outstanding/trading is worth $50 million ($5 x 10 million). If we take this one step further, we can see that a company that has a $10 stock price and one million shares outstanding (market cap = $10 million) is worth less than a company with a $5 stock price and 10 million shares outstanding (market cap = $50 million). Thus, the stock price is a relative and proportional value of a company's worth and only represents percentage changes in market cap at any given point in time. Any percentage changes in a stock price will result in an equal percentage change in a company's value. This is the reason why investors are so concerned with stock prices and any changes that may occur since a $0.10 drop in a $5 stock can result in a $100,000 loss for shareholders with one million shares.
The next logical question is: Who sets stock prices and how are they calculated? In simple terms, the stock price of a company is calculated when a company goes public, an event called an initial public offering. This is when a company will pay an investment bank a lot of money to use very complex formulas and valuation techniques to derive a company's value by determining how many shares will be offered to the public and at what price. For example, a company whose value is estimated at $100 million may want to issue 10 million shares at $10 per share or they may want to issue 20 million at $5 a share.
I some questions about the stock-market. What decides the price of things in the stock-market? If it is demand, is there anyone making offers for the things in the market?
Thanks
Interesting question. The answer is that you control the price to some degree. When you want to sell a share of stock, you offer it for sale at a price you would like to get. If someone wants to pay that amount for it, he/she gets it and that will be the price of that share.
Same exact thing happens when you buy a share. You set the price you want to pay, and see if someone steps up and agrees to sell for that amount. If not, it goes unsold and you have to change the price.
Each transaction is distinct on most of the exchanges, so each will have its own price that the share gets bought/sold for. There is no preset price, it is all buyer/seller determined. The exchanges just help a buyer find a seller and vice-versa.
It is not really accurate to think that a company's value determines the price of its stock. It is really quite the opposite - stock price determines the value, which means the value floats depending on how good the public is feeling about the company. Analysts like to associate value with metrics like PE ratios, but there are significant deviations from those rules so ultimately value, and stock price, boils down to how good people are feeling about a company.
Many good answers here about valuation, the float etc...
When i research a stock, i take it into categories..like high risk biotech where the return can be plentiful, yet one can loose all their money.
I like playing blue chip stocks that may have missed their earning and are on dip..A good time to buy, as many pay a healthy
dividend.
I have to say to the biotech market is my favorite...Keen research can reap some serious rewards, although the FDA will do what they want..One can find a stock at a buck that in 2 years will be at 20..
Research will reap one gold..although playing the old Blue's is a safe way to go. Keep your focus on their expected earnings by the experts..buy on the dip and sell on the rip! And remember the Gov. is just waiting to tax you on any profits. Hold em as long as you can, and that will offset some of uncle sam's taxes..
Don't know how proficient or understanding you may be so you may want to read The Wall Street Jungle and The Wall Street Gang by Richard Ney. Ney was a long time investor and insider who exposed the inner workings of Wall Street in the 60's-70s.
Here is one summary with many points for the individual investor. Note, this was before electronic high speed trading and many other trading 'inventions', but the basic information and modus operandi is still accurate and may be helpful in your quest to learn about the equity 'markets'.
[quote=TwoByFour;33638742] ... The answer is that you control the price to some degree...
Let's say, you like Dunkin Donuts and would like to own a part of the company. There are 100 million shares on the market, or in other words, the company has gone public and is broken down to 100 million potential owners. You want to own 1/1,000,000 of the company so you'll want to own 100 shares. But, you're only willing to pay $50 each ($5000 investment). If other people are willing to pay more, the price will go up like an auction. If everybody feels, like you, that it's only worth $50 for one share, the price will level off at $50. If Dunkin Donuts quits making cream-filled donuts and everybody agrees that it will devalue the company, they might not be willing to pay so much and the price of a share will drop.
Interesting question. The answer is that you control the price to some degree. When you want to sell a share of stock, you offer it for sale at a price you would like to get. If someone wants to pay that amount for it, he/she gets it and that will be the price of that share.
Same exact thing happens when you buy a share. You set the price you want to pay, and see if someone steps up and agrees to sell for that amount. If not, it goes unsold and you have to change the price.
Each transaction is distinct on most of the exchanges, so each will have its own price that the share gets bought/sold for. There is no preset price, it is all buyer/seller determined. The exchanges just help a buyer find a seller and vice-versa.
It is not really accurate to think that a company's value determines the price of its stock. It is really quite the opposite - stock price determines the value, which means the value floats depending on how good the public is feeling about the company. Analysts like to associate value with metrics like PE ratios, but there are significant deviations from those rules so ultimately value, and stock price, boils down to how good people are feeling about a company.
Yup 2x4.
Price fluctuates based on the buy-sell agreement of the LAST sale that ocurred.
So it always reflects the transactions at the margin, i.e. it is in fact the "marginal price".
Value is a whole 'nother bunch of biscuits and books have been written about that!
The design of the Stock Market was for people to have long term investments in the companies which support their livelyhood, community and service to the population.
It was not designed for DAY TRADERS, STOCK FLIPPERS, SPECULATOR AND CREDIT DEFAULT GAME PLAYERS. It was not designed to function based on the FICTION which it functions today.
Nor was it designed with an aim to 'break records everyday".
It was designed for companies to RESPONSIBLY borrow based on ACTUAL PRODUCTION AND SALES PERFORMANCE PROJECTIONS WITHIN A "QUARTER". I was never designed for the OVER LEVERAGING these criminal CEO engages.
Nor was it designed for the Stock Ticker to dictate the operations of the business.
Nor was it designed to allow companies to over leverage themselves, it was designed to support strong reserves, and managed borrowing, so as not to indebt the company beyond what it could project in a matter of 4-8 Quarters, and in some cases no more than 3-5 yrs to pay down that debt. for Long Term Debt, the seperate market of Bonds were the instrument companies should use.
but the Professor based teaching of how to fleece and unaware public, has for decades trained the goon brigade to fleece American and Destroy and Loot companies, while the brokers and traders become wealthy WHILE GAMBLING with the investor money and the stability of the company.
Today, it is nothing more than a Casino Game... and the structure is and does function like a Pyramid Scheme... waiting and soliciting the unwise, so the wealthy can reap the gains.
The Blue Chip Stock holders always get paid, but the Common Stock Holders are used to Over inflate the stock and create the delusion. While the Brokers, Traders, Blue Chip Holder are the profit takers.
The bond holders are next to get paid, which leaves the common stock holder, fleeced and holding the bag of losses.
How they do it> is to claim a correction, and the value plummets, when the common stock holder thinks he has a leg up, they split the stock, saturate the market, and still the winner is the Brokers, Traders, Blue Chip Holder.
The bankers win with interest charged on loans based from fictitious inflated value, the attorneys profit from billing hours to push the deal, the looser again, is the workers, the common stock investors, and ultimately the consumer who results to get a low quality product, with substandard sizing and no service.
Go and Watch: THE WOLF OF WALL STREET. You may think its only a Movie, but it is the demeanor of mentality held about stock tradings, the hype and gaming, the posturing and ultimately the fleecing.
Go and Research the number of companies which have been destroyed by the Stock Market. You might find out, that all the Industries that Built American, were brought down by Stock Brokers, Traders, and Banks, in their collusive cycle..
Fuel today, is fictional in pricing, Under President Bush, Oil went from under $20 a bbl, to a high of $147 a bbl.
This was promoted by the SPECULATORS pumping up the stock values. that every other day "penny pinch them to death" game with the fuel prices, is all driven by the Speculators... we are in too much of a frenzy to figure out, that OIL, being a National Security COMMODITY Item, IT should only be traded between governments, BECAUSE it is a resource of the Lands of a Nation, which belong to THE PEOPLE. Once government buy and trade, THEN it is the government job to sell it to the Oil Companies. THEN AND ONLY THEN, WILL THE PRICE OF OIL STABILIZE.
Instead we have been duped into subsidizing Oil Companies. Why and How... Its because we don't know any better, America are not as astute as they would think, nor does the people have the intellect and will to see beyond the smoke screens to change the course.
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