ELi5: Why would someome buy stocks from a share holder of a company, instead of using that money to invest in the company themselves?
In: Economics
There are two types of corporate ownership: Publicly traded and privately traded.
With a publicly traded company, the only way to “invest” in the company is by buying stock. Companies normally have initial public offerings so they can raise money. They sell off part of the company to anyone who wants in, and in return the company gets money. After that, people play their stock market games to try to get money by buying and selling stocks.
If the company is privately held, then the company can do what ever they want with the ownership of the company. This often happens with small start ups. They pitch to wealth funds and investment groups to invest in them. The investment company gets some sort of partial ownership, or other consideration to be paid back later. So when the start up either goes public with an IPO, the investment group already has a chunk of stock in the company on day on. Or the start up can get bought out and part of the buy out is paying off the investment group before anyone else gets their cut. The exact nature of these deals is closely held and can have lots of quirks and sometimes lawsuits depending on who though they got frozen out of the buyout.
I believe you are mixing the two different options together.
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