Do Stock Market Fluctuations Affect Start-Up Companies

Stock market fluctuations have a great impact on start-up companies, as the very essence of a start-up company’s valuation depends on its market value.

Positive Aspects Regarding Market Fluctuations:

  1. It adds immense value to the business.

  2. It provides new and better means of earning more capital to run, develop, and even expand the business.

  3. It creates a highly economical market value for the company’s shares.

  4. It is the most convenient and transparent way to publicise the company to the public. This will in turn in enhance trust and loyalty from both customers and suppliers.

  5. It displays the company’s investment portfolio in a better picture to the company’s stakeholders, especially the shareholders, investors, and venture capitalists, thus providing a clear platform to visualize their individual investments.

  6. It provides its employees with an opportunity to be a part of the company’s shares. This is highly beneficial, as employees view this particular proposition as an extra employee incentive, which will motivate them to perform better and increase the company’s overall valuation.

Negative Aspects Regarding Market Fluctuations:

  1. The most important aspect that will be affected by market instability is the cost. Several costs have to be addressed during this period and the cost incurred by the company due to all this could be substantially very high.

  2. Another major aspect that gets affected due to market volatility is the company’s responsibilities to its shareholders and investors. Market fluctuations is a testing period where the company’s own objectives will be gauged against the interests of its shareholders who have invested their money in the running of the organization. As these begin to differ, the company will face difficult decision-making.

  3. Not everything can be controlled. Therefore, the company might encounter situations where it becomes vulnerable to the market fluctuations, which could go beyond the control of the management or the company’s CEO. Some of the factors that are uncontrollable are economic conditions, market sentiments, and local & national developments surrounding the business.

  4. Additionally, this is the time when there is little transparency in the business operations and goals. As a rule, companies will need to adhere to regulatory requirements and adopt standard operating procedures. However, these may differ from market fluctuations in order to protect shareholder interests and maintain investor relations in order to keep them interested in the company’s shares.

  5. In addition, it will result in workflow disturbance among the staff and the management team, as the outside stock market fluctuations fuel distractions that lower their productivity.