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Who determines how much stock a business is worth?
That is, can a business split itself up into a billion shares without restriction or are the amount of shares a business is able to sell determined by say the government?
And also when people buy and sell shares daily how does the business keep track of its shareholders to send dividends or call for general meetings etc.?
1 Answer
- The ShadowLv 61 decade agoFavorite Answer
The company's worth is not based on the number of shares issued. It's based on what investors are willing to pay for those shares. For example, a company with a stock price of $10 and 50 million shares ($500 million market value) is worth more than a company with a $2 stock price and 100 million shares ($200 million market value).
Companies can issue however many shares they want. However, they risk diluting the value if they issue too many. Many investors purchase stocks based on earnings per share, cash flow per share, or sales per share. If you suddenly increase the number of shares by 30%, your earnings, cash flow, and sales per share will decrease. Investors will want to pay less and the stock price will go down.
Purchases and sales are usually tracked by brokers, at least for retail investors. The companies pay the dividends to the brokers based on the total number of shares owned by the brokers customers. The brokers then distribute the dividends to individual shareholders. The same holds true for proxy votes and general meetings. I receive notices for shareholder meetings from my broker, not directly from the company.
