The owner(s) of the company *only* gets paid at the IPO. That's the *only* time ... (2024)

The owner(s) of the company only gets paid at the IPO. That's the only time he gets money from the stock market (unless and until the company issues more stock later).

So of course he wants the IPO price to be as high as possible, because that's the money he gets to put in his piggy bank.

In fact, the real goal of a public company is not to increase the stock price, but to maximize the value of the stock to shareholders. In some cases, this means maintaining a flat stock price but paying healthy dividends (in other words, giving some of the profits to the shareholders). This was actually the dominant model for many years (link below, take a look at the growth rate during the '70s and '80s).

The somewhat more recent trend toward increasing share prices is just another way of maximizing shareholder value. In this case, it is done by increasing the market value of the stock being held by the shareholders.

It is quite common for companies today to pay no dividends. Since the shareholders don't get a piece of the profits, the only way to make money on the stock is to buy low and sell high (or buy low and hold for awhile, perhaps until retirement, and then sell, however you want to look at it).

So there really isn't any intrinsic reason for a company to seek a higher stock price. The point is to maximize value, which doesn't always equate to price.

Of course that isn't going to cheer up people who hoped to buy FB on Friday and flip it for a huge profit this week after the "bump". But risk is the whole reason there's money to be made. Sometimes you win, sometimes you don't.

http://www.google.com/finance?chdnp=1&chdd=1&chds=1&...

The owner(s) of the company *only* gets paid at the IPO. That's the *only* time ... (2024)
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