Company A owns 40% of Company B, and Company B owns 15% of Company A. What happens when the share price rises?
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Company A owns 40% of Company B, and Company B owns 15% of Company A. How does this two-way thing work? If the share price of one company rises, does the share price of the other rise? This doesnt seem to make sense because it is recursive.
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Answer:
Both companies are separate entities. If the share price rises in A, they may not mean an automatic increase in B. The companies may be related, but are managed to different objectives. There may be a good divi paid by B , to A, but, that may be absorbed by the company for any good reason, and their board may elect not to pay a divi, to any body. At the end of the day, it is the demand for the shares in either company that determine the value of the shares. If the shares pay a divi, then the demand will be greater.
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