> Why should they care so much about the stock price?
When you need to raise money, the share price and the market cap matter a lot. A low share price disproportionately dilutes the shareholders and makes them angry, especially if they got in at a higher price. Not good...financing low is a sign of company and management weakness to the hedge funds that might profitably short you, which only drives the stock price lower. Many a company that was not cash flow positive found themselves unable to raise funds, and went bankrupt.
On the other hand, if you are cash flow positive or well funded for making it to profitability, a low share price doesn't matter as much.
> Could they let it drop and use some cash to buy back shares?
Yes, but...
#1 - It angers shareholders, especially those that got into a previous financing at a higher price...who feel like they got played. The scenario is that the company raised money from unwitting investors that overpaid, and then bought back the stock at a lower price. They feel like suckers, and take it out on management over time.
#2 - It is never seen as prudent or a sign of strength to buy back shares out of capital raised to bring the company to profitability.
After the company is profitable, buying back shares out of retained earnings...that can be a sign of strength.
Insiders (like Boniuk) buying back on the open market with their own money is also a sign of strength.
BTW, I could be wrong, but I don't think Dr. Seymour was literally asking the group how to raise the share price. I think it was a rhetorical question, sort of like "What can you do?" The implied answer is "Nothing...except continue to execute the business plan responsibly, and wait for the sun to come out." |
