This may or may not have something to do with the news cycle.
In: 0
The existing shareholders/owners are being paid in exchange for their ownership of the company, not the company itself
That $100 is used to buyout the previous shareholders, it doesn’t go to the company itself.
The ratio of money paid has nothing to do with value purchased in the company. In fact the payment does not go to the company, it goes to someone else who owned the share before you.
When you buy a stock you get one share. The value of the share changes moment by moment but doesn’t provide you with anything other than potential benefits of dividends and possibly the right to vote in corporate matters.
When you sell your share the price you get depends on the price someone is willing to pay the company has nothing to do with this transaction either.
Stocks that are initially issued at an IPO or additional stock offering are the only shares that gain money for the company.
It might be more or less than what you paid for it.
The $100 goes to the shareholders from whom they bought the company, it doesn’t stay with the company.
If Bob buys Sarah’s company, Sarah gets the money and Bob gets the company.
If Bob buys a publicly traded company, he buys it from everyone who owns the company. I.e. the shareholders (who all own their “share” or “portion” of the company).
So then the shareholders get the money, and Bob gets the company.
Who do you think they’re giving the money to when they buy the company? The company? They’re giving the money to the previous owners.
Everyone else has pointed out that the shareholders get the money, but there can be something similar to your notion: you can buy a company, then make that company borrow money to essentially pay yourself back for buying it. Now you still own the debt along with the company, but you may find someone willing to buy the company from you and assume its debt in exchange for you paying back only part of the debt (a buyer might do this if the think the company’s future earnings potential outweighs the debt burden). You have in a sense used buying a company to give yourself free money. This doesn’t happen a lot, but it actually does happen, and it’s done by private equity firms. Often it doesn’t work out for the company in the long run—taking on too much debt after being taken over by private equity is what really killed Toys R Us—but it does work out for the people who buy the company in the first place.
If you buy an orange you are giving the money to the orange, you are giving it to the person selling the orange. A company can not own itself. One or more people own the company. When you buy a company you are buying it from those people, they get the money. If it’s a publicly traded company it’s the former shareholders who split the money (based on shares and possibly some other considerations).
Latest Answers