The money the company raises by going public is the amount the underwriting firm pays it to buy the IPO shares. Neither the company nor the
underwriting firm
receives any profit from trading on the secondary market. The company, though, still has a stake in the stock performing well, since the shareholders are now part owners in the company. If the stock price falls, the shareholders might demand restructuring or other changes in the way the company is run.
Companies gain in other ways when their stock performs well. Positive publicity and satisfied shareholders can enhance the company’s reputation, which might help it win new customers and business partners.
Stock as incentive
Additionally, company officers and employees may be offered shares in the stock as part of a bonus or retirement plan, and therefore the individual workers at a company may benefit if the stock price rises. That’s meant to encourage hard work from the employees, and if the price rises, it benefits the shareholders as well. The
risk,
of course, is that the price could fall.
Professor Samuel L. Hayes,
Harvard Business
School
Professor 