How a Company Benefits from the Stock Market
ฝัง
- เผยแพร่เมื่อ 21 ส.ค. 2024
- Trading 101: How a Company Benefits from the Stock Market
This is a bit of a more advanced topic, so make sure you first know what the stock market is and how it works before proceeding with this video. Assuming you have that foundation, then let’s get a bit more in-depth about the stock market; in particularly, how a company benefits after the initial sale of shares.
If you’re not sure what the stock market even is, CLICK HERE (claytrader.com..., for many introductory videos.
Enjoy this Free Content? I'm confident you'd enjoy my premium training courses then: claytrader.com...
Hear real-life trading journeys from "normal" people: The Stock Trading Reality Podcast - claytrader.com...
Finally someone who really understands the stock market to answer such a simple question!!
Cheers
Finally
@@shaphannoel2584 cheers
👍👍👍👍
Wow, this cleared up so much confusion. Well explained!
Glad it was helpful!
Thank you! You explained this perfectly for me to understand the concept. I've been wondering this question for a while now. I am new to the stock market and been learning loads to better understand the market.
Glad it could help!
But the share are own by people? So if shares go up, the company doesn't have more money?
But u said the people own the shares
So the shares that the people own doesnt benefit the company
Future billionaires we got secret
I always thought about this question and you helped to clarify this a lot. Thank you
Glad it could help.
Great video two questions:@Claytrader
1.So an IPO a company won’t give all it’s shares- and what determines price of 1 unit of IPO share
2. When the company decides to sell rest of their shares or use remaining shares to buy company I’m assuming this then subsequently decreases stock price
1) supply vs demand 2) it can, but not always
The intrinsic value doesn’t change, so I believe you are talking about price not value. Since to value a company you need to take into consideration the future cash flows but very good explanation.
Cheers
Ok question 1. What is the stock market ? And why does the government exist?
This should help claytrader.com/blogs/trading-101/
Very clear and concise thank you!
Thanks.
This video helped me a lot in clearing out some confusions. Thank you!
Glad it was helpful!
Also encourages loayalty using stock and option compensation in high positions with long lockup periods
Yup.
correct me if i am mistaken but one thing u have missed, say on the initial offering the owners offered 20% of the company at 20$/share
after 2 year once the shares reach 45$ the company owners can offer another percentage say 10% for the public and therefore making money by "selling" 10% of their company
Why do I feel like I'm doing a homework question for you?
Hi Clay,
Thank you for your videos, I appreciate you making things simple and easy to understand.
Something is not adding up to me regarding how a company can determine the number of shares and at what price when they first go public. Also, is there a limit on how many stocks they can issue? Does issuing more stock dilutes the value of existing stocks like printing money causes inflation, releasing more stocks may cause the price to go down??
Can you shed some light on this?? Thank you
I'll see what I can do for a future video.
Exactly what I was looking for. Thank you!
Glad I could help!
Thank you! You made me much about why " BRANDING, ONLINE REPUTATION MANAGEMENT & MARKETING" of the performance of the company for the company valuation.
Cheers
Great video, very concise. Couple questions if you (or anyone else) wouldn't mind answering:
* Can a company issue 100% of it's shares? And does that actually happen/have any benefit to it?
* Lets say company ABC releases 100K shares in their IPO. Can that company release more shares? Or do those original shares just get split and the price gets diluted? That part always confused me.
Yes and yes
@@claytrader Cool, thanks!
@@ShockwavesFTW cheers
I have a question
How does the performance of the company affect the price of the stock?
For eg we say that if the company is not doing well than if the price of the share of that company is high we consider it overvalued.. But why?
How can the performance of the company affect the price of the share?
Hi John, this playlist should help claytrader.com/video/trading-101/
This always confused me. After the IPO, it is just buyers and sellers of the stock. More buyers increase the price. More sellers decrease the price. Why does it really matter how well the company is conducting it's actual business, if in all actuality, supply and demand of the stock is based only on what the buyers and sellers do?
So the conclusion is stocks only determine the value of the company.
And these 2 types of market does only these things.
1. IPO - To raise capital for operations of the company.
2. Secondary market - To determine the value of the company.
Am I right?
Correct
The way I like to think about it is that the company can always issue more shares to raise capital and the only thing they have to pay for is the dividends, (which they also control how much dividends to pay out). So it's basically a way to get a cheap and safe "loan". They can even use the raised capital from share issuance to pay down high interest rate loans.
The downside is that doing this risks diluting investor's shares. Technically, issuing shares doesn't lower the value of a share, since while there are more shares in the wild, the company also gained cash in its account which balances it out. The question would be whether that capital will make a return on investment. If it does not, then investors will get angry, since the company diluted the shares and had nothing to show for it.
But in general, being a valuable is good for a company's finances.
Thanks for the thoughts.
So, the main point regarding that question would be that companies don't sell all their stocks at IPO but can sell the rest later to gain more capital or can issue more stocks to get additional capital, right?
Correct
This justifies what the books say: "Money Is Just An Idea".
People buy into company stocks which is just an idea and emotions. Hype drives the market up while fear drives the market down.
In many ways, correct.
Amazing explanation
Glad it was helpful!
When a company issues their balance sheet the section of “Cash and cash equivalents” also lists the shares they own of them self and other companies? Because if that’s the case many companies hold less cash than what they actually have. Is there a way of knowing how much in that section is shares or dollar?
Better ask an accountant lol
Amazing Video!! This is just the thing I was looking for. Thank you.
Glad it was helpful!
Perhaps the most important question around stocks which most people don't know the answer of. Well done 👏
Thanks
Nice teaching thanks
You are welcome
I looking for answer on quora "If I invest in a company by buying shares from someone else, how is the company getting money from it?" This is question
But you explained it very clearly as compared to quora.
thank you
Glad it helped!
I appreciate your lessons thank you !
You're welcome.
It sounds rational that companies have flexibility to take risks but in these terms, they employ the investors money rather than their own.
And no one forced their investors to invest.
When the company issues its stocks for the first time - do all of this stocks represent the value of 100% of a company?
So, as I understand, in the future the company can issue endless number of stocks, but that means that each of the stock guarantees lower percentage of the ownership. Am I correct?
Correct.
@@claytrader can a company sell its stocks greater than it's face value.
@@V7B817 if someone is willing to pay that price, sure.
@@claytrader So a company can just continue to issue new stock, whenever they want, to raise more money? Wouldn't that upset initial stock holders because their shares are worth a little less each time this happens?
@@bonilla1240 yes, it would upset them and potentially cause the stock price to fall
But once a company uses their shares to buy another company what happens? Do the shares decrease in value? Do people lose money? Do people just get reset to the amount they bought the share at originally?
No. If people like how the company is behaving, more will buy and shares go higher.
Gee, thank you dude. it's simple and understandble. now let's buy some stocks
Cheers
How is the price affected if once the company is on the stock market and already offered the first wave of stocks, decides to sell new stocks, a second wave? Like TSLA or NEE. will the price go down due to more stocks available? Or will go up due to expectations?
It's all based on perception/expectations...
I think the key point you maybe didn’t mention was how much equity is retained by the firm. I.e. what percentage float? Only then does the company have incentive for share prices to increase and then lever a merger or acquisition with.
Thanks for the thoughts
Yes the man explained well but wasn’t to the point of question. What I actually thought to hear si how the company benefits from the trade of shares among shareholders apart from reputation how can it generate money from already issued shares. Is there commision paid to the company? Help to knw how do they benefits
Does having more shares matter or the growth of the company??
Not necessarily.
How many new shares a company can create is thr any limt. If thr is no limits then google can create more share and buy entire industry right?
No limit.
I have two questions
1: who increases and decrease share prices?
2: what happen when investors sell shares of a company in order to make profit, like gamestop company which hedge funds were trying to decrease thier share price?
This should help: claytrader.com/videos/trading-101-what-makes-a-stock-price-change/
The stocks are solely used for investment and capitalization. That's what they are. That means they use the stock for buying shares or buying companies. Other than that, stocks never get out of the stock market as a direct funding for, say research and development.
Stock is simply just a glorified hybrid combination of loan and gambling based on speculations, perceptions, reputations, and a great deal of luck. When stocks make gains, stockholders make gains. The company doesn't gain anything except a good reputation. Good reputation translates to investor confidence.
When the stock loses, stockholders lose, but the company doesn't lose anything except, again, reputation.
Right, so they do lose if they lose reputation. It'll be much harder in the future to raise funds if they have a tarnished reputation.
So how does traders benefits from company? Rather than dividends. Do sales increased effect directly on stock.
This should help claytrader.com/videos/stock-make-money/
I thought I was the only one
Nope!
Hi friend, i have one doubt with Stock Market. How the listed companies spend their profits? And there is any use with the profits to the share holders?
They spend them however they want.
Wait... so the stocks value is actually just the perception of value based on supply and demand and not based actual profits of the company? Dividends are the actual payouts of a companies profits?
Correct. It's all perception...
ClayTrader ok but the stock is actual real stock in the company right? So if I own 50% of the shares of a company (let’s just say that’s 10 shares), and I have bought these shares for $10 each. If the company becomes very valuable and profitable in the real world yet for whatever reason nobody buys the stock, when that company itself gets sold to another company would I be entitled to 50% of the price sold for seeing as I own half of the stocks? Thanks
@@erikrose7041 this should help claytrader.com/videos/stock-make-money/
Clays been hitting the weight room
And eating my vegetables lol
Question please: now if company ABC used its stock to buy XYZ will ABC's stock price fall?
I don't understand the question.
Brother it depend on the promoter of the company to launch share in the market.
Just suppose three person involved to start the company and they have 10cr in there hand but they need 50 cr to run the company. So what they will do is they will take loans from the Company for ex- 35 cr. So the total amount they have now is 45cr. They still need 5cr. This 5cr they need are given by public in the market. What they do is they just share the amount of 10% of there share in defined amount. Just suppose they divide it into 10 share. Worth share hold 50lacs. And it increases as the company grow in the market. Holding that 1% share doesn't mean you own the company. Those three promoters owns that
Completely new to the stock market. Which of your videos do you recommend for greater understanding?
Here you go: claytrader.com/video/trading-101/
Thank you!
@@skyevandiver6231 cheers
A very basic question: why is that i get no profit of the company's sales of their products, when i have their shares??
This playlist should help claytrader.com/blogs/trading-101/
ClayTrader ok i watched that. Bit still confused. Why would a company not give its operating profit to shareholders?
Also is it true that the price of the share is the price on which it was last traded on. So it doesn't has to do anything with the business that company has done for that day?
Also how many shares do a company keeps to itself to be an owner?
And if i get one share of a company and that doesnt makes me to get profit, then will it also be true if i get 49 percent of shares too?
M confused
Thanks
Again, all those questions are answered in that playlist.
ClayTrader first 4 videos are private on your playlist. And i think those would be those basics that i need. And on your blog the entire playlist is not there. Please help
If you want to "talk stocks/trading in general", that's the entire idea behind my private community here claytrader.com/innercircle/ which you are welcomed to join.
What do traders add to the economy?
Watch this claytrader.com/videos/day-traders-make-society-better-heres-how-stock-trading-101/
Thank you. May you prosper in this endeavor. Excellent explanation.
Glad it was helpful!
Hi, great explanation regarding Flexibility of company basing on positive side when value is up. But would have been great if you would also explain what happened when value of share is going down. (Just a suggestion). Great effect.
I do that here: claytrader.com/videos/stock-make-money/
awesome. please keep the videos of real understanding about what stock investing is coming!
I'll do my best!
So if i keep buying shares of xyz company every month , its value increases which will eventually benefit the company ? Am i right in this ?
It's gonna take more than just you buying to make the value increase, but yes, generally speaking, increasing values benefit the company.
@@claytrader me along with many others buying the same thing would help .. right?
@@sriharshamadananth1276 yes
Thanks to the person who asked the question
Indeed!
How do small companies manage to increase funds after getting registered in stock market???.......I mean what makes people to invest in those companies......please make a video on this......
Thanks for suggestion.
I have a question on the example you made with ABC buying a company. ABC nedds to liquidate shares by selling them, basically selling x % Ownership of the business in order to buy the company they wish to obtain. My question is how companies can expand like this without ultimatly loosing a majority of shares IE controll of the company. Eventually the free market would own the company since ABC is not a majority shareholder in its own company.
Is the answer that ABC hopes to get more income from the new obtained company to be able to buyback/reinvest in ABC even tho they might be valued higher?
Correct
Do the shares of stock increase each year? If the company already sold all of their stocks, how do they use their stock to buy or pay employee.
They can increase at any time.
Can companies emit new shares? Isn’t that going to decrease the individual share price owned by the investors? Something like printing dollars?
Yes.
So if company ABC wants to buy XYZ let's say for 40 million they can give 20 million in cash and 20 million worth of share. My question is might be silly but does ABC buys 20 million worth of XYZ's shares or gives the XYZ 20 million worth or its share
Sorry, I'm kinda confused what you're asking.
Hello I would like to ask. In case a company has already issued shares and trading for more than 10 years now exhange of shares does have any financial effect ? (Meant, does the company loose or benefits any cash so as can mobilize more exchange of shares
2. What are the strategies adopted by organization to raise their share values
3. What are popular system used to monitor shareholders records and the value.
4. What are the basic features, system, data base and strategy commonly used under investors relation department with organization
5. What is the best system and style to prepare investors relation report and then report to the CEO for easy assessment what do key requirements required by CEO to determine whether the investors relation is doing well
Why do I get the sense I am answering homework questions for you?
@@claytrader haha. Good catch. This guy is trying to be slick.
@@johnjames6717 yeah, some people think they are way slicker than they actually are lol
I have a little confusion here, after the company issue shares the shares gonna be with the investors (retail & institutional and the promoters) and if the company is going for an acquisition the company has to first buy back those shares right? Then how are they getting benefit?
No. They can create new shares.
Thanks for the enlightenment bro...
Thanks for watching.
How would a company liquidate or sell their shares in order to acquire another company? I understand the whole underlying value of their shares thing but do the owners of the company give up more of there position? Or do they buy back some of their shares initially handed out?
They can do any number of those things. The core idea though is the more shares are worth, the more flexibility a company has.
Another good reason why companies would want the value of stocks to increase is because it means the executives(and in certain cases employees) wealth increases. They can be paid in stocks.CEOs mostly are, and the if they’re founders their wealth could greatly increase. 99% of Jeff Bezos’ wealth comes from the value of Amazon’s stocks increasing considerably.
Yup. Good incentives!
Thank you
You're welcome
Pls make a Video.... How company use the IPO funds in their business, In what way they trafrase the money to their business account
They sell more shares.
the IPO is set for certain number of shares which will be floating in stock market, how the company pays an acquisition with shares they don’t own? Or you mean they pay from the non public shares?
It’s confusing a bit
They can create more shares.
@@claytrader If a company can create more shares then why doesn’t the net worth of its shareholders increase since they also own authorised shares that are not trading on the stock market?
Doesn’t creating more shares mean they’ll own more shares?
@@mthoko_n no, not unless they buy more. It's called "dilution".
Sorry im late but what happens when i buy all of the “pizza” do i get a 100% of the profit.can u pleas tell me what happens its been stuck in my head for a long time and i cant find a anwser
It means you "own the company"... that would require A LOT of money on your part.
i have one doubt, when counting the total wealth of a person ,why we count up the money that people invested in that company through stocks? please help
Because that is part of their wealth.
I am 14 how to invest in share market in india
Here you go: claytrader.com/videos/how-to-invest-money-as-a-teenager-step-by-step-advice/
Whoever asked that question, a company can create more stock which brings down the value of your stock.
Contd- if a company is failing to make more money they “issue new share” bringing down the vale of stocks (s similar to inflation). They can do the reverse but doing company buy out.
I hear what you're saying, but it does NOT automatically bring down the value.
@@claytrader only exception would be if more people are buying at a faster rate then it’s being issued/selling. Demand and price also have subtle differences depending if it’s listed in the NYSE vs NASDAQ - Auction vs Market valuation
@@victorlopez6170 correct, hence my comment about it not automatically happening.
Very helpful knowledge.....thank you sir.....
Most welcome
How do you sell shares of your own private corporations
You don't.
M I not getting it Or did he just said "XYZ" On purpose 4:42? Its making sense to me if he said "ABC" Raises share to 75$. Somebody please revert
What?
Love your videos! Very informative for beginners.
Glad you like them!
Why cant a company just print more stocks? I mean I kind of get that the stock price decreases but how do people know theres more stock and how does the price actually drop?
They can... that's called "dilution".
@@claytraderOh so companies can just keep on diluting and sell stocks so that they can make more money?
@@davidpark1198 to a point
@@claytrader Oh but I would guesd they lose control of the company if they print too much
@@davidpark1198 yup!
How company benifits from money of day traders?
Liquidity.
Company raise money from IPO can they raise money and after few months go under and shareholders will lose money ,how this is secure?
What do you mean?
@@claytrader I just wonder when company go public they issue shares and how they get paid for this shares and by who?
@@dexter7185 by investment bankers and the general public.
wow, exactly the question i had. Great answer!!
Glad it was helpful!
wat abt buying expanding factories ,land ,...more buildings
Yup!
Pls Make a video.. Will companies can get the fund raised again after the IPO also like a stock split.
Yes. They can sell more shares whenever they want.
Straight forward answer
Good!
I bought an Amazon company stock and jt says it pending I bought it only July 2 9:30 but idk what happening can u help? Or explain
Call your broker.
when the company is listed in secondary market after it is listed in ipo?
Is that a question or statement?
thank u sir!!!
Most welcome!
Great explanation !
Glad you liked it!
I don't think that's the accurate answer. Judging by your answer, the company is not really affected, it just affected shareholders, which is the company happen to be shareholder too.
I think more relevant answer would be things related to trust. For example, if the company want to cooperate with another company, it would be easier. Of course the other company would known whether its overvalued or undervalued. But it still affected
Ps. Sorry for grammer mistake, please correct me, and feel free to argue with me
Thanks for the thoughts.
Owsm
?
Would not it make investors rich also? Now these initial shareholders during IPO could sell and invest in the company
Yes, investors can build wealth also.
Excellent explained
Thanks
What Does capital mean??
Money
love the vid, great example
Glad you liked it!
cool,Shares can act as a means of transaction without cash similar to barter system
Correct
Then what about Bonds? That's it trade like stocks? Does it still has price fluctuations as stocks? Please explain
Good idea. I'll see what I can do.
Thanks mate!
You're welcome!
perfect video!
Thank you!
Does XYZ shares go down if being taken over?
Not necessarily
Does it increase institutional buying?
I'm not sure what you're asking.
@@claytrader If the price of Shares increases does it attracts institutional investors?
it can, yes.
@@claytrader Wow my guess was right 😲
@@confirmjannati in some cases
What does issuing shares mean?
Creating more
i know just the basics of stock exchange like there are buyers & sellers but my question is once a share is sold for say at 10 dollars it becomes the property of that shareholder & now when the price of that share increases he gets the profit & now when he sells the share he gets the money so how does this help the company as the share is already sold ?
The higher the price goes, the "more valuable" the company itself becomes
@@claytrader and thats the only consideration for the company right ? thanks
@@sanghamitramridha620 yup
@@claytrader okay thank you so much
@@sanghamitramridha620 you're welcome
When ROKU sold 1 million shares to purchase another business, why did it cause ROKU share prices to slide?...
Because "selling" causes prices to go down.
ClayTrader So the slide was from the company selling it? Not investors losing value after seeing them needing to sell it off?.. Sorry I’m new to this 😆
Both were the cause.
How to know the intrinsic value of one share?
Many opinions on that.
6:10 But I think its the right decision because shares are a lot more valuable than cash. Imagine if google gave their shares to youtube founder, the money in it maybe worth more than the cash deal right now.
Exactly!
@@claytrader So google made the right decision correct?
@@owentobias21 correct
@@claytrader Thanks for the ans sir, and i have a question. Why does stock buy back is limited for a company? What could happen if a company buyback a lot of shares?
@@owentobias21 if you're interested in "talking stocks/trading in general", that's the entire idea behind my private trading community (which you are welcomed to join) you can find it here claytrader.com/team/