Why is a stock price linked to a Company "going under?"?

Question

What is the connection between a company who has a stock price that is doing poorly and the risk that the company (a bank for example) may fail based on a low stock price? A company could possibly have strong financials and a low stock price...although unlikely. Plus, a company's stock price is market driven....not calculated based on the stock price in the secondary market.

Answer 1

The only interest that a company has in it's current stock price is if it wants to issue more stock to the public to raise capital.  If no secondary public offering is contemplated, it doesn't mean anything.

The stock price is set by investors trading among themselves in the secondary market (the stock market) based n their views of future earnings changes.  The near future has the most weight.

Answer 2

Think of the stock price like a thermometer,  a thermometer

doest not control the temperature but just indicates the temperature.

The stock price does not control the company. Rather, the stock price is a reflection of how well the investors think the company is going to do in the future. If they think the company is "going under" the stock will have little or no value. If they think the company is going to make even more money in the future, the stock price will go up.