If you have been wondering whether a public company makes money when it’s shares are bought and sold on the secondary market (e.g NYSE, NASDAQ, LSE or JSE) the simple answer to that is NO!
Instead when shares are bought on the secondary market the money goes directly to the investors. That’s why a public company wouldn’t make money from it’s share being traded on the secondary market.
But in a primary market a public company receives money when it’s shares are bought and sold because those shares in question will be issued directly from the company itself to the investors.
NOTE: We can define a secondary market as a financial market which allows investors and day traders to buy and sell previously issued financial securities (e.g stocks, options, future contracts and so much more).
So Does A Public Company Care About It’s Current Stock Price?
Yes, public companies are very much concerned about it’s current stock price because even the shareholders use that to evaluate the performance of it’s management.
If the public company’s stock price has been rising then potential investors and other financial institutions will have enough confidence that the management behind that company is doing a stellar job in running the company efficiently.
Nonetheless, a constant declining stock price may introduce problems to the public company if they will need financing to expand it’s operations because even investors and financial institutions will be extremely curious to know why the company has been losing public confidence within the markets.
