If I buy 100 shares of a company, does their bank account go up? And if shares are sold do they go broke?
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If we’re talking shares on the open market then you’re buying and selling them from a 3rd party. It’s no different than buying anything else; the seller gets the profit. You just don’t personally see the seller because you’re using a middleman (broker) for the transaction.
When you buy them, it’s essetially going to their bank account after brokering fees.
When you sell them, it depends who buys them. If it’s a stock exchange that buys them, then the money comes from the stock exchange. If it’s the company, the money comes from the company (this usually happens when the company wants to lower their profits for tax reasons). If it’s to another person, that person pays you.
In most cases (exceptions below) you don’t buy shares from the company, you buy shares of stock from other people who own shares of stock already. That could be other individuals, hedge funds or mutual funds, or so-called market makers in that stock. Their bank account goes up, not the company’s.
Of course, they have to get their shares from the company at some point. A so-called private company (not traded on an exchange) issues shares to its owners. They can also issue shares to employees (like stock options) at any point. When the owners want to take the company public, they do an IPO – an initial public offering, where shares are offered to the public like you and me for the first time. This is how the company gets money for its shares.
Companies can also issue more shares after the IPO, including to the public, but they tend not to: it dilutes the value of the stock when there is more of it. However, if the price is super high, they might do it take advantage, since they get more money for less stock.
To your last question: if everyone wants to sell shares, then their price goes to zero because there are no buyers. The company doesn’t go broke because it’s not their cash being drained, but this obviously means they’re in serious trouble.
Depends on whether you’re buying it in an initial public offering or if they’re already on the secondary market. If you’re buying it from an IPO, then the money goes to the company that issued the stock. But if you’re buying stock that has already been issued and is being exchanged on the market, then the money goes to the person that owned the stock before you did.
Think of it this way. If I own a company and want to raise money for expansion, I can choose to take a portion of my company’s stock and sell it on the stock market. In that initial sale, the initial public offering, the money goes into my company. But now that that stock is on the market, it gets bought and sold by other people, with none of that money going to or coming from my company.
When shares of stock are bought and sold, you are buying from and selling to other investors. You buy 100 shares because some other investor is selling 100 shares. The company itself doesn’t have any direct involvement or financial stake in your buying to selling shares.
Only when a company sells shares at their IPO (initial public offering) or during rare secondary offerings do companies directly gain money from sale of shares. And only during planned/announced share buybacks, company acquisitions, or companies going private do shares being sold get bought by the company.
It’s the same thing as when you buy apples. You buy them from somebody else who decided to offer theirs for sale. You can later offer yours to somebody who wants to buy them.
At some point they came from a tree, but that’s not relevant to your trade and nobody really thinks about it.
The only real difference is that there are thousands of people selling identical apples in a huge marketplace, so every seller posts the asking price of their apples and every buyer posts a bid for how many apples they want to buy, and every bid higher than an ask triggers an automatic trade.
To the person who is selling you the stock.
In the case of an initial public offering or a another public offering, it will go to the bank account of the company.
Most of the time, it will go to the bank account of either another person like you who is selling, or to the bank account of some investment company who is selling.
Most shares of a company are being sold on the market by either individuals or unrelated investment companies. There’s basically a constant queue of people willing to sell for X and people willing to buy for Y, and any exchanges that can happen with that happen. Basically, if you want to sell/buy immediately, if there aren’t enough sellers then the buy price goes up until you find a seller, and if there aren’t enough buyers then the sale price goes down until you find a buyer.
A decent chunk of those people making sales will be employees of the company who have received shares as part of their compensation package. Most below a certain level will just turn around and sell them at the earliest period they’re allowed to.
Now the shares that the company gives to their employees don’t just come out of thin air. While they could technically create more shares, it would dilute the value of the existing ones, so companies will try to do share buybacks to get some of their shares back into their possession. This is also a way that companies can spend any extra profit they have in any fiscal year to reduce their tax burden, while essentially holding onto assets to use for payment in future years.
Stocks are *things*. When you buy them, the money goes to the person you bought them from. When you sell them, you get the money from the person buying them.
If you’re an average job trading stocks on the stock market, your purchase of 100 shares doesn’t (directly) impact the company at all. They already sold off the shares to the market before you bought it (and so you bought it from a broker).
Figuratively speaking, the money you spend goes to whichever other trader/investor decided to sell their shares. When you place a buy order, the transaction is actually pending until they can find a matching sell order(s) for the same price. So most of the money goes to the seller, with some of it also going into broker fees (hence why “buy” price is always higher than “sell” price).
In actuality, no money is actually moving. The only money that moves is between the brokerage itself and the customers’ accounts – and this only occurs upon transferring money in and out, which has nothing to do with individual trades.
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