ELi5: Why would someome buy stocks from a share holder of a company, instead of using that money to invest in the company themselves?

Question

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

Answer 1

For the average investor like you and me, this is the only way to purchase shares in a public company.

Shares are authorized and issued via investment banks who sell large blocks of them to large investors then to smaller investors in what we call an IPO, an Initial Public Offering. This is the only time money paid for that specific lot of shares goes to the company itself. Since the markets are also regulated, all trades between parties are tracked so there is always a record of ownership.

For more info I suggest checking out Investopedia.