lets say a company called xyz recently got listed on the nasdaq exchange and priced at 10$ if I execute a buy order, who is exactly selling their shares? Just ordinary people like you and me? why would one buy shares priced at 10 and sell them to me for the same price? I just don’t get it…? does IPO’s play a key role here?
Bonus question:
I often see recently listed stocks going straight down, take $BREA for example. how is this possible? why would anyone buy their shares and imminently sell for a cheaper price?
In: 3
When the company is private, it still has shares, and those shares can be bought and sold – but often subject to the rules of the company (For example, if X (a shareholder) wants to sell their shares to Y (not a shareholder), perhaps X has to offer their shares to other shareholders first).
When the company goes through an IPO, all the shares people own will be registered with the stock exchange. Then, the shareholders can open brokerage accounts and offer their shares up for sale through the exchange – if they want to.
Also, as part of the IPO, the company usually creates a whole bunch of brand-new shares, owned by the company, and makes them available for sale at the IPO price. You and I can register to buy these shares. If the price drops immediately after the IPO, it often will not be the people who bought into the IPO, but the previous (existing) shareholders, who obtained shares when the company was private. They might well be selling at a profit, especially if they were given or offered shares when the company was just a few people operating out of someone’s garage. Or maybe they just want to cash in – it’s much easier to sell shares if the company is listed, because you don’t have to go and find someone to sell them to.
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