After the initial public offering (IPO) of stock the company no longer has any direct control over stock price. Stock price
thereafter will be determined by the relationship between supply and demand.
As the number of sellers increase the price of the
shares decrease. As the number of buyers increase the price per share increases. But wait a second. What if one
investor had entered the market but had 1 million shares to sell? This would be the same as if 1000 sellers had entered each
with 1000 shares to sell. Price would go down. Therefore it is not the numbers of buyers and sellers that is of crucial
importance but the pressure of shares to sell and the desire to buy shares that is of note.
Our investor with the 1 million shares
would probably need to sell his shares in smaller lots. If so, each successive trade would
probably bring a lower and lower price.
So to influence stock price we need to influence the desire of the investors.
Announce good earnings, fewer investors want to sell and more investors want to buy...share price increases. Lose a government
contract? Investors want to sell fewer want to buy...price goes down.
There are a wide range of factors that can affect
a person's desire for a particular stock. This is why it is so important to investigate each stock thoroughly.
