Wednesday, December 12, 2012

Who Benefits From Stock Price Increases?



It's important to remember that a company does not directly benefit from a change in its stock price, particularly if there is no buying or selling from company owners and officers. Money does not magically appear in the company's accounts when the price of each share rises.

So in this way, yes, it's the traders and investors who directly benefit from a change in stock price.

A short-term trader may see an interesting chart-based technical analysis, buy shares, then sell those shares either at the end of the day or at the end of a few weeks to benefit from a short-term movement in price. The company does not get any of this money.

An investor who sees value in the company may buy today when shares trade at $50 and then sell 3 or 4 years later when shares are worth $80 and thus benefit from the $30 appreciation in share price. None of this money goes to the company.

That's not to say that company officers don't benefit, but they only benefit when they sell a portion of their shares, or fractional ownership, to the open market. All investors benefit from dividends, which are basically a way to share profits with investors. Remember that if you own a share of a company, you are a part-owner in the company as well.

So no, there is no direct benefit to a change in share price as it relates to the company.


source:
http://winninginvestor.quickanddirtytips.com/who-benefits-stock-prices.aspx

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