Stock Prices: Stock prices are very important to a company in that it shows how valuable the company is in the public eye. In essence, possessing stock is the same as owning part of a company. The rules of supply and demand apply in the stock market. When the stock price of a company goes up, it means that people are paying more to buy it because the demand is higher. When it goes down, it means that people are selling it for lower prices as the demand goes down.
Kmart's stock prices have shown a general downward trend over the past seven years. In 1993 Kmart was at its peak trading at $26 per share. The stock hit a low of $6 in early 1996, but made a comeback of sorts in 1998, selling at $22. Since then the stock price of Kmart has tumbled, trading at a mere .13
per share as of last week.
Since the supply of a stock is generally static (unless the company splits the stock or buys itself back), the supply and demand graph for Kmart stock would look like this:
The sky blue line represents D1, demand in 1993. The turquoise line represents D2, demand in 2003. As demand for the stock goes down, the price goes down.
For the next eighteen months, Kmart has the unique opportunity for a major comeback. Its stock is selling for a mere 13 cents per share. It cannot get much worse than that. Getting themselves out of Chapter 11 and back into profitability could cause their stock to turn around and sell for dollars, not pennies.
Publicity: As any stock trader knows, bad publicity can send the worth of a company into a downward spiral of decreasing stock prices. As Kmart began to...