Loans,future investment loss, dividend loss to shareholders,C suite bonus and job performance is measured by this,etc...
You wouldn't want to give business to a company that has been losing value continually right?
Ask HN: Why do companies care about their own valuation?
11–16 of 16 posts
Re: Ask HN: Why do companies care about their own valuation?
#12Shareholders care deeply about valuation because it puts money in their pocket when the valuation rises.
Shareholders are the CEO's boss.
Re: Ask HN: Why do companies care about their own valuation?
#13Publicly traded companies place great importance on their stock share price, which broadly reflects a corporation’s overall financial health. As a rule, the higher a stock price is, the rosier a company’s prospects become.
Re: Ask HN: Why do companies care about their own valuation?
#14Earlier quoted context omitted.
> That's one of negative things about stocks in general in my opinion, because people quite often have short-term (lasting a quarter or two) outlook. That could be easily fixed by requiring all executive and board members' stock to be held for, say, 3 years after vesting before selling.
Has it really vested at that point then? Or is it just a longer vesting period?
I guess that depends on your understanding of "vesting" - and my understanding may be faulty.
As I understand it, if I leave the business before the vesting I get nothing. When the stock vests it becomes mine.
A lock down of the stock then means I can't trade it, but it remains mine (regardless of whether I stay or leave.) Once the lock is lifted I could sell it.
So in that sense there's a difference, yes.
Re: Ask HN: Why do companies care about their own valuation?
#15Imagine if you're the CEO of the company and you own 100000 shares of it. Then your net-worth between 100$/share and 120$/share will differ by $2 million. Quite a difference, isn't? And I think most board members hold certain amount of company's stock, and usually most people want their net-worth to grow as much as possible, so they try to do certain things to increase the stock price. That's one of negative things a…
I mean that making money with public stock market make hardly sense for me. It is not correlated anymore with the value you can bring.
Re: Ask HN: Why do companies care about their own valuation?
#16The main reasons have already been mentioned.. compensation, feedback to the CEO, etc.. but an interesting one that I just saw, and I don’t know if it’s possible, appeared on the TV Show Succession (HBO) where the family's stock in the company (which they control but not by much) secures a loan that the lender can call if the stock drops below a certain price.