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
Imagine you bought a tulip bulb for $100 and tomorrow the going rate is $90 per bulb. It’s the same thing—the going rate for tulip bulbs went down suddenly just like the going rate for a share of a company went down by $10.
In both cases, it doesn’t matter until you want to sell them.
So the money didn’t go anywhere—the person you bought from still has your $100 and you still have the stock/bulb. What’s changed is other people buying and selling bulbs have decided $90 is now the fair price.
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