If a person owns $2B worth of stock in a company that only has $300M cash on hand. And that person decides to sell all their stock. Where does the rest of the money come from? I can’t imagine people continuing to buy shares that are put on the market so the money has to come from someplace.
In: Economics
You are selling candy bars at $1 each. I happen to have 50 candy bars in my locker. My candy bars are valuated at $50. I decide to sell all 50 candy bars at the same time. But today, the demand for candy bars is really low, only 10 kids want to pay $1 for a candy bar. So either I can sell just 10 of them and hold onto the rest, or I can lower my prices. I sell 20 more at $0.75, and then lower again to $0.50 and sell the rest. So my candy bars actually sold for $35, not $50.
NON ELI5 Explaination Below:
In the stock market, you place your shares up for sale in the hope that another person (not the company) pays the price you are offering. If no one wants to pay it, then you can’t sell, or you have to lower your price. That is what drives stock market prices. Also, the number of shares up for sale at every price is public, so if someone sees $2 billion worth of stock hit the market, lots of people are likely to second guess buying it, and potentially sell off their own shares. This is what causes a stock to crash.
Also, companies do not pay someone who is selling stock. Stock is exchanged between individuals as a representation of company ownership. Public companies that have stock are owned by the public.
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