Share trading and the money exchanged, who gains in the process? From where the money comes?

Question

When we trade shares in a share market,one person sells it and other purchase it. Does the company get anything? Suppose the fellow selling it makes a profit, where does this money come from?Some one else must loose the same amount as money on the whole must remain constant in the market.
After IPO did the company get any thing when its shares are traded among share holders?

Answer 1

The company makes nothing from aftermarket trades in its stock. If stock is bought and sold at a profit, the profit is obtained from the subsequent buyer, who pays more for it than his predecessor -- presumably because it has become worth more, so no one has lost money on the deal. This is an example of a general principle: trade is NOT a zero-sum game. In fact, it is a major creator of value. If you buy a loaf of bread, you do so because the bread is more valuable to you than the money you paid for it. But the storekeeper values your money more than the bread. So, value has been created by the trade for both parties, and this is true of any voluntary trade relationship, including employment. Marx's failure to recognize this fact led him to completely erroneous conclusions in his economic theories, and this error was the most expensive mistake in all human history -- it has cost trillions of dollars, and tens of millions of lives, and the cost continues to increase every day.

Answer 2

Let's start with an IPO. A company issues shares to the investors. In this case the company collect money/funds. As equity is pure risk money, the investors who apply for IPO are prepared to loss the money. Here a company gets money and the initial investors gives the money.

When the scrip is listed on the stock exchanges, trading in the scrip/share starts. Many people who have not get allotment but think the company will be good bet in the long run, like to purchase the same at some higher price. The initial investors who think the offered price is giving them good profits will sell. Here money is given by the new purchaser to the seller of the shares. And this continues. Here a new purchaser will wait till the purchase gives him some profits and then sell at a profitable rate. But in case the price comes down, the purchaser can sell by booking loss or keep waiting and holding the shares.

Hope this explanation is sufficient to whet your curiosity.

Answer 3

To buy stock means you are buying ownership in a company, you do this via purchasing shares. When you purchase shares, your money, as well as the other shareholders' money, is invested in the company to use as capital to carry out essential business operations. You make money when the prices of the stock you've bought rises in price which can happen for numerous reasons. When the price of your stock rises, you can sell it, and in turn receive a ROI (return on investment). It's up to you, the investor, to determine what company will likely make you money from rising share prices and dividends, and you can base this decision on many different factors such as P/E ratios, historical data, economic situations, company forecasting, etc. There is no set in stone guarantee from any set of factors that they will make you money, that is where the risk is involved and for you to use your knowledge and do your homework and recognize patterns. What I've given is a simple, straight-forward explanation. Overall, what the stock market is, its a "live and breathing" entity of supply and demand. Although it can get a lot more complicated, confusing, and technical, in turn it can pay off. Good luck!

Answer 4

Company get anything as brokerage. Its share value become more. The advantage is that only the valuation of company becomes more. Total sell minus total buy is the profit of that persion.