Re: [Pen-l] Purpose of stock market

[Bill Lear <rael@xxxxxxxxxx>]

On Monday, April 27, 2009 at 11:46:38 (-0400) Doug Henwood writes:
>
>On Apr 27, 2009, at 11:38 AM, Bill Lear wrote:
>
>> I was also interested in the question that I raised about how stock
>> prices could affect prospects for getting loans for a company.  The
>> basic argument I made to a co-worker is that stock markets are not
>> very good for raising new capital --- at least they are not used very
>> much for that purpose.  The counter-argument is "Au contraire, stock
>> valuations are used to get financed".  And this, I believe, is very
>> dubious.
>
>Most companies aren't public, so they don't have a stock price. But  
>there's no doubt that for public companies, the stock price does  
>affect perceptions of the firm's creditworthiness. And the looks, from  
>admiration to pity, the CEO gets when he steps onto the links.

Ok, but when someone is going to make a loan to a company, wouldn't
they be complete idiots to just look at the stock price?  Wouldn't
they take a serious look at the "fundamentals" like EBITDA and others,
perhaps with stock price just being a secondary concern?


Bill
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