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What Determines A Stock’s Price?

Recently a friend asked me what determines a stocks price. Luckily Motley Fool has answered the questions already!

How stock prices are determined
The opening stock price of a company is established when the company goes through an initial public offering (IPO). As part of this process, an investment bank will use in-depth financial formulas to figure out how much a company is worth, as well as how many shares will be offered to the public and the stock price for each share. The bank may use comparisons to similar businesses to help determine what a company’s stock price should be coupled with other factors such as current and projected performance.

A company’s stock price is determined in part by the total number of shares it issues. If a company is given an estimated value of $200 million, it may issue 20 million shares at a price of $10 per share, or it may issue 40 million shares at a price of $5 per share.¬†

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Source: Motleyfool.com

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