Well the shop sets the price based on what it thinks it can get away with, but that is ultimately determined by the public.
Drugs?
Anyway, Iâm not very pleased with my response to your cake analogy as it doesnât capture all aspects of the stock market.
However, this is what you wrote:
So, weâve got:
Slice Price (Share Price) = 2
Number of Slices (Number of Shares) = letâs say 16
Price of the Whole Cake (Market Capitalisation) = 2 x 16 = 32
Youâre saying that to determine if $2 is a fair price, you need to divide $32 by $16, but the answer will always be $2.
I think what youâre referring to is how much it cost to make the cake (fundamental company value), but that isnât the Market Capitalisation, has no bearing on the share price and doesnât affect the Market Capitilisation.
It was x.6xxxxx . The 6 was multiplied by 5 as well. The rest to the right was cashed out. I thought all the fractional parts wouldnât be, but the 6 was.
Saying the value of a share x the number of shares = value of the company
is the same as
The value of the company / number of shares = value of a share
One does not affect the other if number of shares is staying constant. They move in tandem. The same. Share price goes up 1%. Market cap increases by 1%.
Iâve agreed with this several times now. I think you keep repeating it because youâve still not even understood my point.
I also agree with this.
However, and this is the only thing we disagree on, you believe that itâs possible for something to increase the market capitalisation by 1% directly, which will cause the share price to also increase by 1%. I donât.
Iâve no idea whoâs right. Thatâs why it would be helpful if somebody else could settle the argument. Anybody?
