Who sold the stock off early? If everyone wanted to devest from a specific company and we all sold our stock at the same time and nobody wanted to buy it… huh
The value of a stock IS what it was previously sold for. If it sells for $100, and there are 100 shares issued, the company has a total worth of +$10,000 from stocks.
If the stock sells for 90 bucks, then the “wealth from stocks” goes down to +9,000 total since every share is now “worth” 90 dollars.
Thanks. I’m seeing two conflicting stories in my mind.
I’d the company is worth $10,000 and there are 100 shares. And if I sold 10 for $100 each the company is still worth $10,000?
But who gets to calculate when the value goes down? Is it when someone offers me $90 and I accept? Why can’t I just pretend to be two people and sell myself stock at $10 to artificially tank the price so I can buy the dip? Or do the reverse and pump the price up?
Or maybe the first 10% to sell gets the best deal and the price auto-magically goes down because of ‘market trend’ and each next 10% gets increasingly screwed until the company is worthless?
Stock markets like NYSE are supposed to prevent certain types of manipulation if detected. Wash trades (trading with yourself) is one of the generally illegal methods to move prices.
That second example is kinda true with stock classes and new share issuance (voting shares and non voting shares, among others). It’s absolutely possible to give different types of investors more favorable terms.
But on open stock markets, what you have is simply the order book of bids on purchases versus bids on sales. When the two don’t meet no sales happen (no volume), when a lot of people want to buy and sell you’ll see a lot of jumps up and down as sellers go down a bit to meet buyers and buyers go up a bit to meet sellers, and this represents the volume. If sellers are more eager to sell in total then they’ll push price down as a net effect, or vice versa pushing it up for buyers competing to buy.
Current price is simply latest sale price. Total valuation is simply total shares multiplied by sale price. Yes, this isn’t accurate at all in a basic mathematical sense as it doesn’t capture nearly enough information on actual value in any sensible way.
There don’t have to be actual sales for the price to move in an orderbook based system though, the price could collapse just from all the buy orders at the top of the range being cancelled.
Because the main way money moves in and out is by people buying in and cashing out. If no company injected more (by dividends and stock buy backs) and no company took money out (by IPOs, funding rounds or stock options), it would just be a box people would put money in and get money out.
ln that case it would be a zero sum game, because every dollar taken out by someone was put in by someone else, but because there is a flimsy connection to companies creating/extracting value in the real world it is not.
Someone bargaining to buy a melon at a market can negotiate a price with the seller. Then the next buyer may negotiate a better price. You could record that the price of melons has fallen. However, all of the melons and all of the currency in the transactions is accounted for. Nothing has been lost.
But the stock market sounds like a zero sum game.
Who sold the stock off early? If everyone wanted to devest from a specific company and we all sold our stock at the same time and nobody wanted to buy it… huh
The value of a stock IS what it was previously sold for. If it sells for $100, and there are 100 shares issued, the company has a total worth of +$10,000 from stocks.
If the stock sells for 90 bucks, then the “wealth from stocks” goes down to +9,000 total since every share is now “worth” 90 dollars.
Thanks. I’m seeing two conflicting stories in my mind.
I’d the company is worth $10,000 and there are 100 shares. And if I sold 10 for $100 each the company is still worth $10,000?
But who gets to calculate when the value goes down? Is it when someone offers me $90 and I accept? Why can’t I just pretend to be two people and sell myself stock at $10 to artificially tank the price so I can buy the dip? Or do the reverse and pump the price up?
Or maybe the first 10% to sell gets the best deal and the price auto-magically goes down because of ‘market trend’ and each next 10% gets increasingly screwed until the company is worthless?
Congratulations, you just figured out market manipulation! Some of that isn’t strictly legal, but since when does that affect people’s actions?
Stock markets like NYSE are supposed to prevent certain types of manipulation if detected. Wash trades (trading with yourself) is one of the generally illegal methods to move prices.
That second example is kinda true with stock classes and new share issuance (voting shares and non voting shares, among others). It’s absolutely possible to give different types of investors more favorable terms.
https://en.wikipedia.org/wiki/Share_class
https://en.wikipedia.org/wiki/Stock_dilution
https://en.wikipedia.org/wiki/Preferred_stock
But on open stock markets, what you have is simply the order book of bids on purchases versus bids on sales. When the two don’t meet no sales happen (no volume), when a lot of people want to buy and sell you’ll see a lot of jumps up and down as sellers go down a bit to meet buyers and buyers go up a bit to meet sellers, and this represents the volume. If sellers are more eager to sell in total then they’ll push price down as a net effect, or vice versa pushing it up for buyers competing to buy.
Current price is simply latest sale price. Total valuation is simply total shares multiplied by sale price. Yes, this isn’t accurate at all in a basic mathematical sense as it doesn’t capture nearly enough information on actual value in any sensible way.
There don’t have to be actual sales for the price to move in an orderbook based system though, the price could collapse just from all the buy orders at the top of the range being cancelled.
No, that’s the “price” of a stock. Price and value are two different things.
How is it a zero sum game if prices can just go up or down almost arbitrarily?
Because the main way money moves in and out is by people buying in and cashing out. If no company injected more (by dividends and stock buy backs) and no company took money out (by IPOs, funding rounds or stock options), it would just be a box people would put money in and get money out.
ln that case it would be a zero sum game, because every dollar taken out by someone was put in by someone else, but because there is a flimsy connection to companies creating/extracting value in the real world it is not.
Someone bargaining to buy a melon at a market can negotiate a price with the seller. Then the next buyer may negotiate a better price. You could record that the price of melons has fallen. However, all of the melons and all of the currency in the transactions is accounted for. Nothing has been lost.
Sure, but there’s nothing material actually backing the stocks.