Page 44 - THE MARKET WHISPERER

42 PART 1 - Allow Me To Introduce You… To The Stock Exchange

accumulating contracts, patents, income and profit, its value rises. The
value of its shares rises accordingly. But the “value of a stock” is an abstract
concept. A company’s transactions fluctuate frequently, which makes it
difficult to determine the true value of its stock.

When a company offers shares to the public, it is selling part of its stock.
The sale is a recruitment of money by the company which the company
does not need to return. Buyers believe they are purchasing cheaply, and
hope that in the future they will sell for more. From this point on, the shares
are traded between buyers and sellers who for the most part are not the
company’s original owners. To protect the interests of both buyers and
sellers, and to improve reliability and create greater fluidity, it was decided
that stock trading would be conducted within the controlled environment
of the stock exchange.

Can any company offer shares to the public and become a “public
company?” No. A company wishing to recruit money through the stock
exchange must meet tough criteria related to sales turnover, profits, and
financial stability. Not every company needing money is interested in
going public, because after making the offering, it will need to continue
upholding tough regulatory standards which might limit its progress; it will
be required to become transparent, which exposes its secrets to the public
including its competitors. This is a costly endeavor, and the company will
also be required to include the public that holds its shares in its decision-
making processes. In short, there are no free lunches.