The share price is the amount you would pay to buy one share of a company at a given moment. It changes throughout the trading day as buyers and sellers meet and strike deals.
On a screen you will usually see a live price made up of a bid and an offer. The bid is what buyers are willing to pay, the offer is what sellers are asking. Trades typically happen somewhere between these two numbers, and the most recent trade becomes the last price quoted.
How a share price is set in the market
Most modern stock exchanges run order-driven markets. Participants post buy and sell orders at specific prices, which stack up in the order book. When a compatible buy order meets a sell order, a trade prints and that price becomes the new last traded price.
The bid-offer spread shows the gap between the highest bid and lowest offer at that moment. Tighter spreads usually mean better liquidity. In less liquid shares the spread can widen, so the last price may be some distance from where you can actually trade.
Some markets also use market makers. They quote two-way prices and take the other side of your trade when natural buyers or sellers are not there. Opening and closing auctions can set a single uncrossing price at the start and end of the session when many orders are matched together.
Data feeds vary. You might see real time prices, or a delay, or prices adjusted for splits and dividends. Brokers and data providers can display slightly different figures because of rounding, refresh rates or how they treat corporate actions.
The different share prices you may see on a screen
- Bid and offer: the live two-way quote. You sell at the bid and buy at the offer.
- Mid price: roughly the halfway point between bid and offer, often used for charting and valuation snapshots.
- Last price: the price at which the most recent trade executed. It can be stale in quiet markets.
- Previous close: yesterday’s official closing price, often the reference for calculating today’s percentage change.
- Open and close: the first and last official prices of the session, sometimes set in auctions.
- High and low: the highest and lowest traded prices during the day or over a chosen period, such as 52 weeks.
- Adjusted close: a historical price series that is adjusted for splits and dividends to make past and present levels comparable.
- Off-session prices: some venues show indicative or extended-hours quotes. Liquidity can be thin and spreads wider.
In the UK, prices are often quoted in pence. A price shown as 250.0 could mean £2.50. On multi-listed shares, you might see prices in different currencies across exchanges or via depositary receipts, which can have conversion ratios.
What moves a share price from one day to the next
Share prices respond to new information, changing expectations and shifts in risk appetite. Common drivers include:
- Company news: results, guidance, strategic updates, management changes and large contract wins. In London these land through the RNS system.
- Corporate actions: dividends, buybacks, rights issues and mergers change supply-demand or the per share maths.
- Macro factors: interest rates, inflation trends, commodity prices and currency moves can reprice whole sectors at once.
- Sector moves and peer results: news from a competitor can lift or weigh on similar companies.
- Flow and positioning: large funds rebalancing, short covering or options hedging can push prices in the short term.
- Charts and levels: breakouts, ranges and round numbers can attract orders from technically minded traders.
Not all moves are rational in the moment. Liquidity, rumours and stop orders can amplify a swing before prices settle.
Share price, market value and valuation multiples
The number on the screen is just one piece of a company’s value. Market capitalisation is the share price multiplied by the number of shares in issue. Two firms can trade at the same price per share but be very different sizes if their share counts differ.
Investors compare price with fundamentals using ratios. The P/E ratio takes the share price and divides it by earnings per share, which hints at how much is being paid for each pound of profit. Dividend yield compares the annual dividend per share to the price. Price to book relates the price to net assets per share. None of these says a share is automatically cheap or expensive on its own, but together they build a picture.
Percentage moves are usually measured against the previous close. If a share closes at 200p and trades at 210p today, that is a 5% rise ((210 - 200) / 200). Be careful when comparing long-run charts that are not adjusted for splits or special dividends, since unadjusted series can make price history look broken.
Corporate actions and how they affect the displayed price
Stock splits increase the number of shares and reduce the price per share in the same ratio. Value does not change at the moment of the split. A 2-for-1 split turns 1 share at 600p into 2 shares at 300p.
Reverse splits (consolidations) reduce the number of shares and lift the price per share. Again, the overall value is unchanged at the point of the action.
Dividends usually see the share trade ex dividend on a set date. On that morning, the price is marked down by roughly the cash amount per share, subject to market moves that day. Historical series may show an adjusted price to keep the chart continuous.
Rights issues and placings increase the share count. A theoretical ex-rights price can be calculated to reflect the discount on the new shares and the bigger pool of stock. Actual trading prices can differ as the market reassesses the company’s outlook.
Buybacks reduce the share count over time as the company purchases its own shares in the market. That can lift per share figures such as earnings per share, although the share price still moves with results, cash flow and sentiment.
The exact mechanics and how your broker shows adjustments can vary by provider. Price series from data vendors also differ in how they apply adjustments, so always check the definition of any price you are using.
Where you see and use the share price in practice
Traders use live prices to place orders, set stops and take profits. Investors use prices to track performance, build valuation models and compare peers. Prices are embedded in index levels, ETFs, options and futures. They flow into portfolio valuation and risk reports.
The same company can have multiple share classes with different voting rights and, sometimes, different prices. Dual listings can create small gaps between markets because of currency moves, trading hours and local demand.
A quick worked example
Imagine Apex plc has 120 million shares outstanding. It trades today at 250p. The market capitalisation is £300 million (120m x £2.50). Yesterday it closed at 240p, so the day’s change is +10p, or +4.17% (10 / 240).
Apex later announces results that beat expectations and guides to higher margins. Buyers lift the bid, sellers raise their offers, and the last price moves to 275p as more trades go through. If Apex then starts a share repurchase programme over several months and reduces the share count to 108 million, the price will still be set by supply and demand, but earnings per share may rise because profits are spread over fewer shares. The market will weigh the cash outlay against the improved per share metrics when deciding what price to trade at.
This example shows the central idea. The share price is a live auction outcome. It responds to new facts and shifting expectations, and it sits at the heart of how investors value, compare and own listed companies.