If there's an IPO of two otherwise identical companies, which one would you pay more for:
- company A who's shares will be traded in a deep and liquid market, so you can get rid of them whenever you need money (eg for unforeseen circumstances)
- company B who's shares can not be sold easily afterwards?
If the answer is A, you see how the secondary market can help the first issuer reap a higher price, thus helping the company succeed.
By the way, you are not alone. I was asking myself very similar questions a while ago. Mostly in the form of: "why would a company's management ever care about share price?" (Outside of when it's trying to raise more capital.)
A company's management cares about share price (and sometimes dividends) because that's what the owners of the company (shareholders) care about. If the directors of a publicly traded company don't care about share price, then the shareholders will vote in new management that does.
At the same time, share price isn't something management can directly change. They do so by running the business well so that it generates profits and growth.
So the question "why would a company's management ever care about share price?" can be answered "because it's usually an indicator of whether or not they're doing a good job and provides job security."
- company A who's shares will be traded in a deep and liquid market, so you can get rid of them whenever you need money (eg for unforeseen circumstances)
- company B who's shares can not be sold easily afterwards?
If the answer is A, you see how the secondary market can help the first issuer reap a higher price, thus helping the company succeed.
By the way, you are not alone. I was asking myself very similar questions a while ago. Mostly in the form of: "why would a company's management ever care about share price?" (Outside of when it's trying to raise more capital.)