begin [EMAIL PROTECTED]'s quote: | *** Thanks Gerry & Dep for the crash course! I got the context | wrong by not understanding what the share value drop really ment.
actuallythe drop in share value isn't *directly* tied to what the company is doing. it's based instead on what investors think the potential of the company is. for instance, 100 years ago there were companies doing well selling buggy whips. people who thought that automobiles would never catch on probably thought that investing in buggy whip companies was a good idea -- they were making money, after all. but at the same time there were people who had this other idea, building automobiles. they weren't making money at the time. and in order to get into business, do development and establish the things necessary for manufacturing, distributing, and selling cars, they needed money. so they sought investors who believed or could be talked into believing, that even though cars weren't a profitable business at the moment, they would oneday be, so people who were willing to finance car companies might end up making a lot of money. in some cases loans were made to the companies -- the equivalent of corporate bonds, which pay, generally, a fixed rate and which are repaid before the company's owners get anything; in some cases shares of stock -- part ownership in the company -- were sold. these can rise and fall in value based both on dividends -- the piece of the company's profit due each part owner based on the number of shares owned -- and on the likelihood that the value of the company itself will rise and fall. (if you own 1/100 of the company, and it pays nothing each year in dividends, if the value of the stuff it owns in land, equipment, and inventory has grown, then the value of the piece of the company has grown, too.) now. we've seen red hat shares rise to an insane $252.00 since the company's initial public offering in 1999, then drop again, to friday's close of $5.03. when it was $252.00, the company was not profitable, but people believed it would be hugely successful. now, at $5.03, the company is actually making a profit, but people's enthusiasm for its future has diminished. and the fact is, it's probably a decent $10 stock. so the drop in caldera share prices, from about $1.00 to $0.74 on thursday and a friday close of $0.87, means that following wednesday's announcement those who had invested in caldera decided that caldera wasn't in such good shape after all, so some of them sold shares for the best price they could get, which was $0.74. but friday, when ransom love had offered his explanation, investors were feeling a little better about the company, so they were willing to pay more to get it. remember -- in stock sales, the governing factors are both what people are willing to sell it for and what people are willing to pay to get it. -- dep http://www.linuxandmain.com -- outside the box, barely within the envelope, and no animated paperclip anywhere. _______________________________________________ Linux-users mailing list - http://linux-sxs.org/mailman/listinfo/linux-users Subscribe/Unsubscribe info, Archives,and Digests are located at the above URL.
