Originally Posted by Dr Millmoss
The cash is not included in the share price. It is at most an abstraction attached to the value of the company, but is not otherwise reflected in the price of the shares.
By the same token, debt is not subtracted from a company's share price
, but may come into consideration in valuing the company if debt service becomes a major financial issue.
The "share price" of any stock is nothing more than the accumulative "opinion" of all the buyers/sellers of that stock. Any and all "news" that may enter into the thinking of those same buyers/sellers has an effect on that price. If I, or any other rational investor, had to choose between two companies .... one with no debt and a boatload of cash "in the bank" .... and another with no cash and a ton of debt .... the choice would be an easy one. IMHO, a lot of people tend to place too much emphasis on the "technical stats" of a company and forget that the stock market is nothing more than a "gambling house" and is swayed by "mass psychology" much more than tech. stat info. It's easy for an "investor" to legitimize an opinion with statistics .... but in most cases, that would be, not only not helpful, but misleading.