Re:The Covid-19 pandemic is forcing a rethink in macroeconomics
by ry_co on Friday July 24, 2020 @02:08PM
(#23942661)
The main way speculative investors benefit the company is that they hold stocks because they believe it will be more valuable in the future, so that they can sell it for a profit. This demand for the stock drives up the price. Since stock is essentially a portion of the company, this also drives up the valuation of the company. Since the company is more valuable, they can offer equity to investors for a higher price, allowing them to invest in their own business and grow.
It's indirect, but it's a very real benefit.
Edit: Adding to this, the company's reinvestment of funds generated by issuing stock drives demand in other places of the economy. Investing in your own business means spending money on people, infrastructure, and other goods you need to offer your company's service. This necessarily drives demand for these goods. Additionally, this creates cascading demand through the keynesian multiplier effect.
Re:The Covid-19 pandemic is forcing a rethink in macroeconomics
by notJim on Friday July 24, 2020 @02:25PM
(#23942885)
Do companies routinely issue new stock to raise money? I thought it was a rare occurrence, obviously the IPO, and then occasionally afterward. Your edit is clear.
It's indirect, but it's a very real benefit.
Edit: Adding to this, the company's reinvestment of funds generated by issuing stock drives demand in other places of the economy. Investing in your own business means spending money on people, infrastructure, and other goods you need to offer your company's service. This necessarily drives demand for these goods. Additionally, this creates cascading demand through the keynesian multiplier effect.