Why does a company care if their stock prices keeps on falling? (IRA, credit rating)

[Morten_M]

Lets assume I run a bank and my stock price has fallen from $100 to $85 dollars over the period of 1 month. As the bank CEO/CFO/Treasury, why does it matter what my company's stock price is, in the public markets? It's not like investors are directly pulling money out of the bank's equity when they sell their stock on the open markets so where is the harm?

The only thing I can see where trouble may lie for the bank is if they need to issue any other securities in the market. The market may not be as receptive to buying their securities. Hoping someone could chime some more light into this and potentially even explain a financial statement impact, if there even is one. Thanks!


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[Lowexpectations]

Because the owners care. Addiontally they might be paid partially on stock performance

[IDtheftV]

I would add to that - that the owners can replace management indirectly.

A company who's stock price languishes relative to what it "should" be can subject itself to takeovers by activists who can take over board seats and pressure management directly.

Originally Posted by Lowexpectations

Addiontally they might be paid partially on stock performance

Right. Often, key employees own stock options. If they perceive that upper management doesn't care about the price, they might detach and go find work elsewhere. Losing the key employees directly affects operational performance.

There is also just a matter of egos. What is the CEO going to say at get-togethers with peers when his/her stock price is languishing whilst the other CEOs' stock prices are doing just fine?

[TwoByFour]

It affects the company's ability to raise capital. If the stock price is falling, investors think it is over-valued or doing something wrong. Credit rating agencies will give the company a lower credit rating, which means borrowing money will be more costly.

[oneslip]

Like LOW said- the senior execs that have the most stock options care- why do you think the senior leaders at Wells were whipping the low level employees so hard- to get the share price up. Whip the employees like an old nag in a Kentucky Derby race.


Also if a bank were on the prowl for any takeover the lower share price = lower currency in any stock transactions.

[rjm1cc]

I will vote with the who cares group. A change for one month is not anything I would pay attention too. It is the long term performance of the stock that matters to me.

The drop in price could also be due to conditions that they do not control.

[StealthRabbit]

if their stock prices keeps on falling?

Devil is in the DETAILS...
keeps on falling?

Lots of trouble, to the point that NO ONE will want to; work at your company, buy your company, OR invest in it, OR do business with you... Good-bye, close the doors.

Not a great way to succeed in BUSINESS...But great for politicians!!! One of the GOP primary candidates ran our 66 yr old HIGHLY successful company nearly to the grave in 6 short yrs (Cut the Market Capitalization my more than 50%). Previously we LOANED CASH to the US Gov for them to meet payroll... After the 'raid'... not much value remains, little cash, and 300,000 lost engineering positions @ $100k each, and little to NO innovation / aspirations to sustain the company. RIP

[MountainBiking]

If all CEOs thought the same way as the OP's hypothetical CEO stock market investors would be doomed.

[Big-Bucks]

With penny stocks, the people who start up these companies often don't care that much if the company succeeds or fails. They put themselves on high paid salary until the company fails.