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Share price decline

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Share price decline

  • This topic has 1 reply, 2 voices, and was last updated 6 years ago by John Moffat.
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  • August 25, 2018 at 4:32 am #469312
    melissahurley
    Member
    • Topics: 14
    • Replies: 7
    • ☆

    Sir how does a significant diposal in shares causes the share price to fall?

    August 25, 2018 at 10:11 am #469353
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54659
    • ☆☆☆☆☆

    Share prices are determined by the dealers in order to make sure there are as many people wanting to buy as there are people wanting to sell. You can only sell shares if there are people willing to buy them, and you can only buy shares if there are people willing to sell them.

    If more people are wanting to buy, then the price increases (to encourage others to be prepared to sell them). If more people are wanting to sell, then the price falls (to encourage others to be prepared to buy them).

    Also…..a big disposal of shares suggests that the seller thinks there are going to be problems with the company in the future. This in itself is going to depress the share price.

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