How does buying stock help a company if the money is still yours and the company never uses it? ?
- zman492Lv 71 month agoFavorite Answer
Most of the time when a person buys stock the person pays another investor for the stock, so the purchase does nothing to help the company.
Sometimes a person may buy stock directly from a company, such as when the company has an initial or secondary public offering. When a person buys stock from a company the money paid does go to the company which directly helps the company.
Either way, when you buy stock the money is no longer yours. You paid the money for ownership of part of the company. At some point in time you can to get get a return on your investment. The money you get from selling the stock is then yours.
If the company goes bankrupt you probably will not be able to sell the stock you bought and your entire investment will be lost.
- 2 weeks ago
Even I had this question in mind when I started investing in the stock market. It did seem strange that the buying and selling that we carry out should have anything to do with increasing a company’s capital in any way. But it does and let me tell you how.
It is not just the purchase and the selling of the stocks that affect a company’s wealth but also price movements in the market that play a role here. Publicly traded companies also get the benefit of becoming more popular among investors since their activities are always in the limelight.
A company earns during the initial public offering (IPO) of the stocks or during future stock issues. However, sometimes, it is not just the public stocks that the investors are interested in but also the private stocks.
Some owners get rich by selling off a portion of their company. Microsoft is one such company where Bill Gates has sold off a major part of the company, retaining only a tiny percentage of it. This is how companies make money through stocks.
- StephenWeinsteinLv 71 month ago
The money is not still yours. After you buy something, the money is no longer yours and belongs to whomever sold it to you. Sometimes a company sells its own stock and the company does get and use the money. Other times, someone who bought stock sells it and gets the money.