While a high share price discourages trading in the company's stock, it advertises the company's stellar performance to existing and potential investors.
A high share price also discourages corporate takeovers, assuring the jobs of senior management. Existing investors can realize some quick gains by selling their shares at high profits.
2. The drawback of having a high share price is that investors willing to sell off their shares cannot do so because potential buyers are discouraged. Another disadvantage is that it puts much pressure on the management to maintain the entrenched performance level. Any subsequent fall in prices will not meet favorable reviews.
Thus, there are pluses and minuses to having a high share price.
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