When you talk about how to determine what a companies stock is supposed to be worth, how is this determined?

Question

which method is more true:

A. That the company can just randomly choose the price they want their stock to begin to sell at ?

B. or, that the company just divides up how many stocks they have by the amount that their company is worth less debts and expenses?

C. or that economical factors, political, and social factors are responsible somehow?

Answer 1

b

Answer 2

When a company is planning to go public, it would be given to any investment banker who in turn would decide the price of each of the stock.

Answer 3

C, companies have an indirect affect on their share prices. They can not set the price, but they can make smart choices which will make more people want to buy it and drive the price up.

Answer 4

B would give you the book value of the stock or the current accounting value.  That is if you sold off everything the company had and paid the debts this is what would be left over.

The stock market is really something closer to C.  essentially it is the present value of all future expected earnings of the company discounted by the cost of money and the risk in the company.  C is just some of the factors that go into estimating the future earnings

Answer 5

During a company's initial public offering, there are a number of factors that could determine what that initial price will be.  But once it hits the secondary market, there is one thing, and one thing only that determines the price of the stock:the general sentiment of what "the market" think's it's worth and nothing more.  I know this sounds very vague, but there is a name for this idea:the efficient market hypothesis, which says the current stock price is a reflection of all known information, sentiment, and supply and demand factors of the stock, and all this is reflected in the price itself.

Answer 6

The value of a stock is bound to and bound by exactly one factor:

What someone else will pay for it.