Example: if I bought $100 share of ABC company and tomorrow it’s $90, I get that I would incur a $10 loss if I tried to sell it, but I don’t understand what happens to the $10 difference ABC company still has from me.
Edit: okay so in this scenario:
1. i bought the share from the issuer
2. there is a downturn and the s&p index is down by 3,000 points
The first people to hear that the market is about to drop went ahead and cashed out their $100 share back from abc, however I was not lucky and my share is now worth $90. Wouldn’t ABC company have my $10? All the companies listed on the index, they get to keep the difference of the value of what the share was yesterday vs. today. Sure, the equity part of ABC company got smaller, but they still keep the $10 difference should everyone come back and cash out their shares?
In: Other
Suppose you invest in a company. Powell Motors is a large car company in Detroit. You think they make good cars and you want to buy some stock in the company. Let’s say their stock is at $100 a share. You only have $100, so you buy one share.
Two weeks later, Powell Motors unveils their new car — the car for the common man. It looks like this:
https://simpsons.fandom.com/wiki/The_Homer?file=TheHomer.png
And it costs $82,000. Immediately, the stock price of Powell Motors tanks. Anyone who owns stock in the company sells it for anything they can get. Something has obviously gone critically wrong in that company. You were not paying attention to the news, however, and you missed all the excitement. When you check the stock prices several days later, you see that Powell Motors stock is selling for $20 a share.
Where did your money go? Well, it went to whoever you bought the stock from. If you bought it from the company, then it went to whatever they spent it on. If you bought it from some other guy, then it went in his wallet. You made a trade, you got the stock. If their stock price had gone up, you’d be happy. But it went down. Way down. And now you’re not happy.
You can still keep your stock. It’s yours. You don’t have to sell it at $20. Maybe their stock prices will go back up. Probably not though. The company is likely to go out of business. Then the stock is worth zero. Where did all the money go? The value disintegrated. They put some moron in charge of new car development and he ran the company into the ground.
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