Suppose you own 100 shares of IBM stock which you intend to sell today. Since you will sell it in the secondary market, IBM will receive no direct cash ﬂows as a consequence of your sale. Why, then, should IBM’s management care about the price you get for your shares?

Suppose you own 100 shares of IBM stock which you intend to sell today. Since you will sell it in the secondary market, IBM will receive no direct cash ﬂows as a consequence of your sale. Why, then, should IBM’s management care about the price you get for your shares?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter16: Capital Structure Decisions

Section: Chapter Questions

Problem 11MC: What is the value of Ls stock for volatilities between 0.20 and 0.95? What incentives might the...

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Question

Suppose you own 100 shares of IBM stock which you intend to sell today. Since you will sell it in the secondary market, IBM will receive no direct cash ﬂows as a consequence of your sale. Why, then, should IBM’s management care about the price you get for your shares?

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