How do stocks work and how do both sides (company and buyer)benefit from it?
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You buy stocks. The money goes to the company to innovate and expand they get bigger and are worth more money and your stock is worth more money
A company issues stock – they get money for selling shares of ownership that provides them funding to expand. Additionally, it may be a way for the private owners to sell their stake in the company.
The buyer owns a share of ownership in a business that they (presumably) believe will be profitable and grow more valuable.
Stock is just a percentage ownership of a company. This ownership entitles you to certain rights, typically a share of the revenue (in the form of dividends when they are issued) and votes for the board of directors (the group that makes the really big decisions, like hiring the CEO) or other major issues (like sale of the company entirely).
The company benefits only when they issue new stock. They sell additional ownership in the company in exchange for an influx of cash, which can be used to fund new ventures or operations. Subsequent sales of issued stock don’t benefit the company at all. Individuals benefit because by buying shares, the get the rights I mentioned in my first paragraph.
Subsequent sales follow the same rule, but instead of the company, you substitute the current owner of the stock. When they sell the share, they get cash _now_, and the buyer gets the ownership with all the benefits this entails.
You ever watch SharkTank? It’s kind of the same thing except anyone with money can participate, and even sell their pieces of the business to other people also wanting to participate.
Now, not all stocks actually give you a share of the profits (dividends), so all you get is the share of ownership in hopes it goes up in value.
The company sells a stock in order to increase availability cash. They can take this and use it for anything they may like. Sometimes startups will give stock as bonuses instead of paying it out in cash.
As a stock owner you are banking on the value going up so you can sell it at a later date. Some stocks pay dividends so when a mature company has profits they don’t want to reinvest in themselves they pass it along to the owners.
There are other benefits but this covers the basics.
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Stocks are the representation of a shared ownership in a company. If you own 1% of the stocks of a company you own 1% of the company. During annual shareholder meetings where things like the budget, strategy, board of directors, etc. is voted on you have 1% of the voting power. And if that budget includes dividends to the shareholders you get 1% of those dividends.
Stocks were invented because companies would become larger then what a single person could afford. It costs a lot of money to start and build a company to where it becomes profitable and no single person have that kind of cash. But if a lot of people get together they can scrape together enough money to build a big profitable company.
Notice that the company itself does not particularly benefit from having stocks issued. But the company does not actually have anything to say in the matter as it is completely owned by the shareholders. Asking how a company benefits from having stocks is like asking how a car benefits from having a registration. The company is just a tool for the shareholders to make money and have no will of its own. Workers within the company might have opinions and a few is even allowed to express those opinions to the shareholders but these employees have their own separate agendas and no real power other then that granted to them by the shareholders.
Companies issue stock and get back money in return that can fund expansion, allow founders/pre-IPO investors to take money off the table.
When most investors buy shares of stock, they are buying from other investors who are selling — not the company (company only sells shares at their IPO and very rare secondary offerings).
Investors hope to get share price gains and for many companies, dividend payments.
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