Corporations are run democratically with one vote per share/stock. When you buy stock you're buying a vote in what that company does, typically via a representative democracy (the company board) electing an executive (the CEO). You probably don't care deeply about the supply chain of Amalgamated Widget or whatever the fuck, so it's implied that your vote is to enrich the shareholders. The traditional (out of style) way is called a dividend, where the company takes its profit, divides by number of shares, and gives that much per share to all the shareholders. A newer way that depends on market stuff is a stock buyback, where the company buys some of its own shares to remove them from circulation, lowering supply and raising the price.
Shares can be bought and sold. The stock market is the place where people do that. The stock market is actually a service where you post an offer to sell a share of whatever for some price, someone else offers to buy at some price, and the exchange makes all the trades people would be happy with happen. The stock price you usually see reported is the average of the price of recent successful trades. The stock indices you see on the news (DJIA, S&P 500, etc) are just the sum of a bunch of stock prices. They tend to go up and down together, so it's a good way to get a rough idea of how good it is to be a capital-owner that day.
When a company does well, its profits go up, which means it's able to give more money to the stock holders (via dividends or buybacks or whatever). If you expect company to perform better in the future, that means a share of it is worth more than a share of a similarly profitable company that's not growing. Since people are willing to buy it at a higher price, the stock price goes up. But this involves speculating on the future, so people are buying and selling based on a mix of information, some good, some wild ass guesses.
Finally, since stock prices go up and down, and they can be bought and sold, you can make money off of them by buying low and selling high, even though that doesn't have anything to do with the actual purpose of the stock (voting to give yourself dividends). The ups and downs are driven by future speculation, and by other people trying to buy low and sell high, and by people trying to bet on what those people will do, so it's quite chaotic. You can keep adding layers of this until you're visiting /r/wallstreetbets, but this is more a style of gambling associated with the stock market than it is the actual purpose of the market itself (which is determining what different bits of the means of production are worth, so you get your money's worth when you buy some to vote on giving yourself dividends).
tl;dr: Stock price is the sum of how valuable it is to control a slice of the means of production, expected future growth, and wild guessing. The wild swings aren't that important in the real world, but the general trends are how our society allocates control of the MOP
The company is run by the board and CEO on behalf of the shareholders. The company doesn't need to benefit separately from the shareholders, it's just doing what it's supposed to do.
A higher stock price is nice to have when issuing stocks, since it's a cheaper way for the company to compensate execs and certain workers, but this isn't the primary purpose of stock or the main reason the company would want the price to go up.
The stock price should go up if and only if the expected value of owning the stock over the next few years* has went up. That could be because the company is "doing well" - maybe released a new product that's doing better than anyone expected, made an industrial process more energy-efficient, whatever. But it could be that they announced they're feeding all their employees into a blender and selling their blood to vampires and bones to werewolves - if that makes more money for the shareholders than whatever the company was going to do beforehand, the price still goes up.
*Really it's the lifetime value of owning the stock, but money you get in the future is worth less than money right now, until dividends ten years from now don't really matter. The "time value of money" is the concept that deals with this.
Like I said at the start, the traditional way of doing this is pretty easy to understand. Look at this chart. The squares with a D in them are when Exxon Mobile paid out a dividend. If you mouse over them, it'll say something like 0.87 - that means on that day Exxon sent a check for $0.87 to every shareholder (I mean... obviously if you have two shares you get $1.74 instead of two checks, but you know what I mean). A lot of companies (notably the big tech ones) don't do dividends anymore and use more convoluted systems, but this is the basic principle.
And if you own shares in a stock, you'll occasionally get mail from the company asking you to participate in the shareholder's meeting, telling you what the measures to vote on are, and giving you the board's recommendations for votes. Generally these are very low-participation though, since A - you can buy and sell votes, so some people have a lot more votes than you and B - shareholders generally are okay with whatever the board is doing, otherwise they'd put their money somewhere else.
Can someone please explain if there is any actual logic or rationalization behind the stock market because nothing makes sense
Corporations are run democratically with one vote per share/stock. When you buy stock you're buying a vote in what that company does, typically via a representative democracy (the company board) electing an executive (the CEO). You probably don't care deeply about the supply chain of Amalgamated Widget or whatever the fuck, so it's implied that your vote is to enrich the shareholders. The traditional (out of style) way is called a dividend, where the company takes its profit, divides by number of shares, and gives that much per share to all the shareholders. A newer way that depends on market stuff is a stock buyback, where the company buys some of its own shares to remove them from circulation, lowering supply and raising the price.
Shares can be bought and sold. The stock market is the place where people do that. The stock market is actually a service where you post an offer to sell a share of whatever for some price, someone else offers to buy at some price, and the exchange makes all the trades people would be happy with happen. The stock price you usually see reported is the average of the price of recent successful trades. The stock indices you see on the news (DJIA, S&P 500, etc) are just the sum of a bunch of stock prices. They tend to go up and down together, so it's a good way to get a rough idea of how good it is to be a capital-owner that day.
When a company does well, its profits go up, which means it's able to give more money to the stock holders (via dividends or buybacks or whatever). If you expect company to perform better in the future, that means a share of it is worth more than a share of a similarly profitable company that's not growing. Since people are willing to buy it at a higher price, the stock price goes up. But this involves speculating on the future, so people are buying and selling based on a mix of information, some good, some wild ass guesses.
Finally, since stock prices go up and down, and they can be bought and sold, you can make money off of them by buying low and selling high, even though that doesn't have anything to do with the actual purpose of the stock (voting to give yourself dividends). The ups and downs are driven by future speculation, and by other people trying to buy low and sell high, and by people trying to bet on what those people will do, so it's quite chaotic. You can keep adding layers of this until you're visiting /r/wallstreetbets, but this is more a style of gambling associated with the stock market than it is the actual purpose of the market itself (which is determining what different bits of the means of production are worth, so you get your money's worth when you buy some to vote on giving yourself dividends).
tl;dr: Stock price is the sum of how valuable it is to control a slice of the means of production, expected future growth, and wild guessing. The wild swings aren't that important in the real world, but the general trends are how our society allocates control of the MOP
How does a company benefit from its stock price increasing? because it can issue more stock at the higher price? are there are ways, too?
The company is run by the board and CEO on behalf of the shareholders. The company doesn't need to benefit separately from the shareholders, it's just doing what it's supposed to do.
A higher stock price is nice to have when issuing stocks, since it's a cheaper way for the company to compensate execs and certain workers, but this isn't the primary purpose of stock or the main reason the company would want the price to go up.
In a "properly functioning market" the stock price increase would be good only because it reflects that the company is doing better, right?
Not really?
The stock price should go up if and only if the expected value of owning the stock over the next few years* has went up. That could be because the company is "doing well" - maybe released a new product that's doing better than anyone expected, made an industrial process more energy-efficient, whatever. But it could be that they announced they're feeding all their employees into a blender and selling their blood to vampires and bones to werewolves - if that makes more money for the shareholders than whatever the company was going to do beforehand, the price still goes up.
*Really it's the lifetime value of owning the stock, but money you get in the future is worth less than money right now, until dividends ten years from now don't really matter. The "time value of money" is the concept that deals with this.
Ok, so the core of the stock value is because the stockholders can vote to provide themselves with the companies wealth, in some manner?
Yeah.
Like I said at the start, the traditional way of doing this is pretty easy to understand. Look at this chart. The squares with a D in them are when Exxon Mobile paid out a dividend. If you mouse over them, it'll say something like 0.87 - that means on that day Exxon sent a check for $0.87 to every shareholder (I mean... obviously if you have two shares you get $1.74 instead of two checks, but you know what I mean). A lot of companies (notably the big tech ones) don't do dividends anymore and use more convoluted systems, but this is the basic principle.
And if you own shares in a stock, you'll occasionally get mail from the company asking you to participate in the shareholder's meeting, telling you what the measures to vote on are, and giving you the board's recommendations for votes. Generally these are very low-participation though, since A - you can buy and sell votes, so some people have a lot more votes than you and B - shareholders generally are okay with whatever the board is doing, otherwise they'd put their money somewhere else.
thank you
Oh boy. That's quite a question. I'd suggest starting at the beginning / [PDF version]