A:

The short answer is "no". To understand why, recall that the stock market is actually comprised of two markets - a primary market and a secondary market.

In the primary market, a company issues shares to investors who remit capital to the company for the shares. It is only at this time that the company receives capital for their shares (this is the process of equity financing), and once the shares are issued at the specified offering price, the company receives their cash.

In the secondary market, investors who originally bought the issue in the primary market sell their shares to other investors, who in turn hold their shares and eventually sell them to other investors as well. It is this secondary market that is actively followed by the business media and produces the daily price changes in stocks. Because this market only involves investors buying and selling securities from other investors, public companies themselves do not see direct profits or losses from price changes.

However, it is still advantageous for a public company to have a strong share price because it increases the company's market capitalization and thus its ability to issue more equity shares at relatively high offering prices (effectively allowing it to raise equity capital cheaply).

To learn about the details of initial public offerings, read The Murky Waters Of The IPO Market.

RELATED FAQS
  1. What is the average range for the price-to-earnings ratio in the electronics sector?

    Understand the difference between the primary market and the secondary market, and learn which investors are able to participate ... Read Answer >>
  2. When does a primary market become a secondary market?

    Understand the difference between the primary and secondary markets and why the secondary market is where investors go to ... Read Answer >>
  3. What's the difference between primary and secondary capital markets?

    Learn how in the primary capital market, securities are issued for the first time, while in the secondary market, investors ... Read Answer >>
  4. Who trades in primary and secondary capital markets?

    Understand how primary and secondary markets function in the trade of financial securities between investors, and learn how ... Read Answer >>
  5. What securities does the primary market deal with?

    Find out what kinds of securities are traded on the primary market, including who can participate in trading and the basics ... Read Answer >>
Related Articles
  1. Investing

    Comparing Primary And Secondary Capital Markets

    In the primary capital market, investors buy directly from the issuing company. In the secondary market, investors trade securities among themselves.
  2. Investing

    What is the Secondary Market?

    The secondary market is where investors purchase securities or assets from other investors, rather than from the issuing companies themselves.
  3. Investing

    Why Do Companies Care About Their Stock Prices?

    Read on to learn more about the nature of stocks and the true meaning of ownership.
  4. Investing

    What are Issued Shares?

    Issued shares are the amount of authorized stocks a company’s shareholders buy and own. The annual report shows the number of outstanding shares.
  5. Investing

    What's the Primary Market?

    The primary markets are where investors can get first crack at a new security issuance.
  6. Investing

    What is the Stock Market?

    A stock market is where shares in corporations are issued and traded. Stock markets are key components of a free market economy.
  7. Investing

    What Are Corporate Actions?

    Be a savvy investor - learn how corporate actions affect you as a shareholder.
  8. Investing

    Don't Let Stock Prices Fool You

    Find out why a stock with a six-figure share price can still be a good value.
  9. Investing

    What's Share Capital?

    Share capital, also called equity financing, is the total amount of money and property a company has received for selling its shares to shareholders.
  10. Investing

    Capital Markets

    Capital Markets are financial markets where organizations that need money for productive long-term purposes.
RELATED TERMS
  1. Secondary Market

    A market where investors purchase securities or assets from other ...
  2. Impact Day

    The date on which a corporation makes a secondary offering of ...
  3. Secondary Offering

    1. The issuance of new stock for public sale from a company that ...
  4. Capital Markets

    Capital markets are markets for buying and selling equity and ...
  5. Share Capital

    Funds raised by issuing shares in return for cash or other considerations. ...
  6. Secondary Stock

    A stock that is considered riskier than blue chips because it ...
Hot Definitions
  1. North American Free Trade Agreement - NAFTA

    A regulation implemented on Jan. 1, 1994, that decreased and eventually eliminated tariffs to encourage economic activity ...
  2. Trickle-Down Theory

    An economic idea which states that decreasing marginal and capital gains tax rates - especially for corporations, investors ...
  3. Derivative

    A security with a price that is dependent upon or derived from one or more underlying assets.
  4. Fiduciary

    A fiduciary is a person who acts on behalf of another person, or persons to manage assets.
  5. Sharpe Ratio

    The Sharpe Ratio is a measure for calculating risk-adjusted return, and this ratio has become the industry standard for such ...
  6. Death Taxes

    Taxes imposed by the federal and/or state government on someone's estate upon their death. These taxes are levied on the ...
Trading Center