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What is the real value of a single share of company stock? Let's ignore the "the value is what someone is willing to pay for it" angle. At some point, there has to be a real inherent value to company stock for it to be worth someone paying money for it.

Stocks that pay dividends have an obvious value, but not all stocks do that. I'm not asking about dividend-bearing stocks.

There is also the notion of gaining control of a company by purchasing a controlling interest. I'm asking about stocks where this is an impossibility (more than 50% owned by a single individual, etc.).

So, to ask a specific, if hypothetical, question:

Assume a company at IPO; call it XCo. XCo is quite profitable. Before the IPO, XCo is 100% owned by a single person; call him Mr. X. The IPO documents show that after IPO, 51% of the stock will be retained by Mr. X, and that there is no intention of paying dividends.

Why would anyone be interested in purchasing stock in XCo?

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  • $\begingroup$ I will readily admit that this is an Economics 101 type question, but I have never heard a reasonable explanation. Also, apologies if this is off-topic. $\endgroup$
    – wfaulk
    Commented Jul 31, 2013 at 15:21
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    $\begingroup$ According to economics, there is no such thing as "real inherent value", aka objective value. There is, however, subjective value, which is why we care about the value of a company being what someone else will pay for it. In your example, people will want to buy XCo because they think its stock price will go up. $\endgroup$
    – John
    Commented Jul 31, 2013 at 16:12
  • $\begingroup$ That's honestly a better answer than most I've heard. It at least bears its own weight. I would argue against the notion that nothing has objective value. At some point, certain objects help prevent you from dying. Unless life has no value. Which I suppose is almost a reasonable tenet for pure economic study, except for the fact that life is a requirement for subjective value assessment. $\endgroup$
    – wfaulk
    Commented Jul 31, 2013 at 19:28
  • $\begingroup$ What I meant by there not being an objective value is that prices are not determined with reference to some objective value. Saying life has value is a different sort of value than what economists mean usually. If you wanted to sell me water, then the subjective value is very important. If I am in the city, I may not pay more than 1 dollar for a bottle. If I am in the desert and low on supplies but have lots of money, I might pay 500 dollars. What matters is the expected amount of subjective value an additional unit will give me (aka marginal utility). $\endgroup$
    – John
    Commented Jul 31, 2013 at 20:33

1 Answer 1

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The real price of a particular stock of a non-earning company with reference to a single share depends on the following factors of finance and theory. Some of these are; absolute price, psychological and speculation, game theory, economic and strategic motives, categories such as, the Efficient Market Hypothesis (EMH) and residual income theory. In general IPO context, investors may use such factors as profitability, growth rate, and strategic significance of stocks for the evaluation. The knowledge of the company’s growth and increase of its value can affect the stock’s value positively, even if it does not involve dividen or control.

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    $\begingroup$ Moderator comment: This answer may be AI generated due to its vague and generalised nature $\endgroup$
    – Attack68 ♦
    Commented Aug 7 at 5:53
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    $\begingroup$ It is, multiple answers for this user are AI generated $\endgroup$
    – Arshdeep
    Commented Aug 7 at 8:06
  • $\begingroup$ Hey Guys, even though I am a very old user but new here as I have not used much of the site. I do answer questions and if required I will do a research on the internet and may copy-paste the required portion if required as an answer. These are not AI generated at all. $\endgroup$
    – AshaKantaSharma
    Commented Aug 7 at 12:55
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    $\begingroup$ It took me two minutes to debunk your claims about HJM or Longstaff-Schwartz algorithm being breakthroughs since 2005/6 in your other two low-quality answers. $\endgroup$
    – Kurt G.
    Commented Aug 8 at 8:59

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