22

According to Yahoo Finance, a single stock in Alphabet Inc. is worth 898.7 USD as of this writing.

Question: What does the price of $898.7 reflect? I can imagine the price is one of the following options:

  1. Highest bidding price
  2. Lowest asking price
  3. Price for the latest transaction
Bob Baerker
  • 76,304
  • 15
  • 99
  • 175
Vingtoft
  • 1,545
  • 2
  • 12
  • 16

3 Answers3

38

The quote price is simply the last price at which a trade completed.

Rocky
  • 23,960
  • 5
  • 67
  • 90
  • 4
    So what prohibits a company from purchasing its own stock a 2x the price to artificially bump quote price? – Phil Jul 04 '17 at 18:59
  • 15
    @Phil: The law. – Lightness Races in Orbit Jul 04 '17 at 19:10
  • 4
    @Phil I think Lighntess is overcomplicating it. The company can buy its own stock at 2x the value, but other sellers will still be selling it at the regular price. If you are a random buyer, who are you going to go with? The seller selling at the normal rate or the seller selling at 2x rate? – David says Reinstate Monica Jul 04 '17 at 19:50
  • 1
    @LightnessRacesinOrbit Actually this sorta kinda happens already, although not from the company itself - often another company will offer to buy the company's stock at a premium to its current trading price. Usually the trading price will quickly rise to close to the offer price. –  Jul 04 '17 at 20:40
  • @Michael that's how hostile takeovers happen/begin yeah? Company Y says they'll buy company X's stock at a premium in an effort to gain a ton of shares? – BruceWayne Jul 04 '17 at 22:09
  • @DavidGrinberg I believe you mean "if you are a random seller who are you going to sell to? The buyer asking the normal rate or the buyer asking 2x rate?" – user253751 Jul 04 '17 at 22:29
  • @user20574 No, I mean if you are a random buying who (as in which seller) are you going to go with. – David says Reinstate Monica Jul 04 '17 at 22:51
  • 2
    @DavidGrinberg But there is no seller offering 2x the market value. The question was about if the company is offering to buy their stock for 2x the market value. – user253751 Jul 05 '17 at 00:15
  • 11
    @Phil: Generally, a lack of cash. A company with $100 million in outstanding stocks usually doesn't have $200 million available. – MSalters Jul 05 '17 at 07:53
  • It seems that from the way the market rules are executed, it won't get bought at the 2x price. See here: https://money.stackexchange.com/a/52265/36734 – ThomasW Jul 05 '17 at 08:48
  • 3
    @Phil Why would they waste their money doing that? An increase in the quoted stock price has no benefit to the company. (An increase in the price at which you can actually sell the stock benefits it when issuing new stock, or when employees cash in share options, but artificially boosting the quoted price in the way you suggest will have no effect on the price you can actually get for the stock.) – Mike Scott Jul 05 '17 at 13:01
  • 1
    @phil the law as Lightness stated. Any company that is trading its own stock have to disclose an investment plan with some antecedence. Otherwise it is inside trading. https://www.sidley.com/-/media/files/publications/2013/11/trading-by-corporate-directors-and-their-affilia__/files/view-article/fileattachment/final-best-law-firms-2014-article-2-pages--11-05__.pdf – Mindwin Remember Monica Jul 05 '17 at 13:52
  • @LightnessRacesinOrbit you are talking about inside trading legislation, right? The company can trade its own stock at whatever price they want, but they have to disclose an investment plan ahead of time. https://www.sidley.com/-/media/files/publications/2013/11/trading-by-corporate-directors-and-their-affilia__/files/view-article/fileattachment/final-best-law-firms-2014-article-2-pages--11-05__.pdf – Mindwin Remember Monica Jul 05 '17 at 13:54
  • 1
    @Phil Even if the company does this, it will just be an outlier in the company's stock price chart. Other sales that day will be at a price that regular investors are willing to pay. And the company will lose lots of cash, since they won't be able to sell the shares for anything close to what they paid for them. – Barmar Jul 05 '17 at 21:36
  • @Phil Stock prices are typically only published from markets that have trading rules. And one typical rule is that you can't buy a stock for more than the lowest price for which it is on offer. Other than to manipulate the market or launder money, why would you want to? And why should the market let you do that? – David Schwartz Jul 05 '17 at 21:45
1

Price for the latest transaction. If the stock is selling for $898.7 means that the stock is currently trading for $898.7, and it will be your ask price of stock if you purchase currently.

Rohan Byanjankar
  • 35
  • 1
  • 9
    I am not sure your last comment, "... it will be your ask price of stock if you purchase currently" is necessarily correct. It is possible that the latest transaction occurred at 898.7, but the current lowest ask price might now be 900 [because all shareholders offering 898.7 to sell their shares have been bought out at that price, and no other current offers exist until 900]. This is why it is important to note all of the ask price, bid price, and latest transaction price. – Grade 'Eh' Bacon Jul 04 '17 at 17:12
  • 6
    Why bold when 1/3 of the words in your answer are bold? – quid Jul 05 '17 at 14:41
  • @quid: It's very bold of him – user541686 Jul 06 '17 at 01:15
0

Stock price is set to the price with the highest transaction volume at any given time. 

price x no of stocks traded

The stock price you cited was only valid in the last transaction on a specific stock exchange. As such it is more of an "historic" value. Next trade will be done with the next biggest volume. Depending on the incoming bids and asks this could be higher or lower, but you can assume it will not be too far off if there is no crash underway.

Simple example stock exchange:

Buyer A wants 20 for max   $400
Buyer B wants 10 for max   $900
Buyer C wants  2 for max $1,000

Seller A offers  5 for min $700
Seller B offers  5 for min $900
Seller C offers 30 for min $950

Price will be $900 at which 10 stocks can be traded = trade volume $9,000
If it was $899 only 5 could be traded = $4,495
If it was $901 only 2 could be traded = $1,802
Daniel
  • 5,316
  • 1
  • 19
  • 20