Stock Trading and Other Things

How does it benefit the Companies whose shares are getting traded on stock exchange.?

How does Secondary Market Shares benefit the Companies becos whatever money they wanted they got thru IPO.?
Secondary Market benefits Investors. How does it benefit the Companies whose shares are getting traded on stock exchange.

Public Comments

1. well, they get from the capital for the business.... and if the company grows then they distribute dividends to those who purchased their shares... and if you get in touch with share traders like Mansukh, Sharekhan you will get a better idea..

2. Not always secondary market benefit investors. But as far as the benefit of cos. r concerned, it is higher the prices in market higher is the valuation of the company. Shares r assets of a company.

3. The company is essentially that of the share holders. When 10 people join together and put 1 Lakh each and start a business, it is called partnership. But the amounts from 10 people are invested in the company. All 10 people might not be available on a daily basis to run the business, they will employ a manager to run the daily business.

Similarly for large corporations, millions of investors invest in the company. These share holders are the actual owners of the company. But in reality if you have one share of the total million share of the company you practically cannot be doing any thing to affect the operations of the company. You need to have the support of at least 10% of the shareholders to call a general meeting of the company and to propose a resolution. If the resolution is passed by majority of people present and voting, then it becomes law for that company. You will read more about these in the company law, if you are interested.

Now coming to your question. Imagine that you have a family run business. You need to bring in money for the new projects. You decide to go in for IPO, but dont want to dilute your controlling authority in the company. So you will only issue shares in such a way that you hold 75% of the shares of the company. Imagining that the value of the shares in your hand is Rs. 100, and you hold 75,000 shares, you are really owning 75 Lakhs. If the market value of the shares goes to 150 Rs., then your value of shares goes to 112.50 Lakhs.

When you read in the papers that Ambani is the richest person (or say 4th richest person), this value of the shares are also taken into account.

Hope this is clear.

4. In market if share price increases the valuation of company increases and vice versa...