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 can’t sell $2billion of stock for $2billion. The price of that stock will plummet as you try to dump it.
But the value comes from buying it, not the value of the company. Also, the value of the company isn’t just its cash on hand, it’s all its assets minus its liabilities. But back to stock values, when a company sells its stock, you get the value of that stock. Then you can sell or trade it as you wish. The company doesn’t buy it back unless they choose to do so. You sell it to other investors. The value is what the investors think it’s worth.
Imagine you bought a car. When you sell it you don’t sell it back to the automaker, you sell it to another driver or maybe a dealer. That cars value is based on the market and how other drivers value that car.
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