Soo... Am I understanding this about the stock market correctly?

[Cats Cats Cats]

So company benefits of the stock market
1)  So companies can raise capital from their IPO or issuing new shares or diluting their stock later.
2)  They can get better loan rates or loan more money based on their stocks market cap.

So when you buy a you are 99.9% of the time buying it from another individual or institution and there is no benefit to the company other than a possible increase in market cap?

[Gaspar]

So company benefits of the stock market
1)  So companies can raise capital from their IPO or issuing new shares or diluting their stock later.
2)  They can get better loan rates or loan more money based on their stocks market cap.

So when you buy a you are 99.9% of the time buying it from another individual or institution and there is no benefit to the company other than a possible increase in market cap?

You are buying and selling ownership in the company.  Your purchase or sale affects overall valuation of the company.  This can effect the company positively or negatively.  The number of shares offered is calculated based on advantages in trading volume and are at the companies discretion. The goal is to present an attractive earnings per share and maintain a healthy price per share.

[Teatownclown]

Despite the wimp in the White House....the chumps running the House, and all the rich detached Senaturds, QE 3 will help.....print more money....re-inflate the country!

[Cats Cats Cats]

Inflation is one solution to our debt problem.

[AquaMan]

So company benefits of the stock market
1)  So companies can raise capital from their IPO or issuing new shares or diluting their stock later.
2)  They can get better loan rates or loan more money based on their stocks market cap.

So when you buy a you are 99.9% of the time buying it from another individual or institution and there is no benefit to the company other than a possible increase in market cap?

This is my understanding. Even though the original sale of the stock is the primary source of capitalization for the company, they can increase their operating capital when the stock value rises. Most companies own some of their own stock and can sell it or borrow against it, to raise cash when they need to. Conversely they can buy more when the stock value is perceived as too low and build up reserves. Used effectively, a well run company can avoid re-issuing more stock, which dilutes the value of each share, unless they want to broaden their ownership thus reducing individual risk.

For instance, I bought Micro-soft when it was quite cheap back around 1990. The stock became popular which drove the price up and kept small investors out. Microsoft split the shares to lower their price and broaden their base. One of my shares became two but each share was worth less. The stock remained strong and grew back up to its original price quickly. We were all happy.

[we vs us]

So company benefits of the stock market
1)  So companies can raise capital from their IPO or issuing new shares or diluting their stock later.
2)  They can get better loan rates or loan more money based on their stocks market cap.

So when you buy a you are 99.9% of the time buying it from another individual or institution and there is no benefit to the company other than a possible increase in market cap?

Companies have to actually hold offering periods for their stock, and they have to report the amount sold and the initial price it will be sold at.  Typically those offering periods are divided into several buying rounds based on level of investorship, so that the first level would be institutional folks (investment banks, funds of varying shape and size, and other favored public or private players); also at that point, employees -- usually the C level folks -- would get a chance to buy, too.  Then in descending order varying levels of consumer and individual investors who are either low volume players or not preferred by the company would buy. Of course, the share price will have started to fluctuate with the first buying rounds, so even though Company A IPO's at 10$ a share, if you're participating in a later buying round you could easily get in at $15, 20$, etc. 

And yes, 99.9% of the time -- if you're playing with your personal E-trade account, say -- you will be buying from another share owner. 

Stocks are essentially a commodity, though, and function through supply/demand and scarcity principles.  The fewer shares on offer, the (theoretically) higher the value will be.  The more shares outstanding, the cheaper (in cost) they will be.  This is why during these days of cheap borrowing capital for major corps you'll hear of them taking out super-cheap loans to buy back $Bs in shares -- essentially hoping that if fewer shares are outstanding then share value will increase. If the price goes up, they can theoretically issue more shares, pay back the cheapo loans and essentially arbitrage themselves into a much better capital position.

[we vs us]

Look how smart we all are!

[AquaMan]

Yeah, well...smart would have been holding on to that Microsoft as it continued to split and being retired comfortably at the moment.

[Cats Cats Cats]

This is my understanding. Even though the original sale of the stock is the primary source of capitalization for the company, they can increase their operating capital when the stock value rises. Most companies own some of their own stock and can sell it or borrow against it, to raise cash when they need to. Conversely they can buy more when the stock value is perceived as too low and build up reserves. Used effectively, a well run company can avoid re-issuing more stock, which dilutes the value of each share, unless they want to broaden their ownership thus reducing individual risk.

For instance, I bought Micro-soft when it was quite cheap back around 1990. The stock became popular which drove the price up and kept small investors out. Microsoft split the shares to lower their price and broaden their base. One of my shares became two but each share was worth less. The stock remained strong and grew back up to its original price quickly. We were all happy.

When they split stock it isn't the same as issuing more shares and diluting.  Your 2 stocks worth $1 are now 4 stocks worth $1.  If you have 1 company with 1 share of stock worth $100 and you decide you are going to issue another share that 1 share would then be worth $50.  I believe that credit rating (which translates to ability to borrow) is changed by your companies market value compared to amount of debt. 

[Cats Cats Cats]

I would argue that a compay would have a market value if the stock market didn't exist.  However, the benefit to the stock market value is the ability of individuals to buy into companies with good ideas that might not be making any cash.  At the same time, stock prices don't seem to match reality at all.  Kind of weird.

[Gaspar]

This is my understanding. Even though the original sale of the stock is the primary source of capitalization for the company, they can increase their operating capital when the stock value rises. Most companies own some of their own stock and can sell it or borrow against it, to raise cash when they need to. Conversely they can buy more when the stock value is perceived as too low and build up reserves. Used effectively, a well run company can avoid re-issuing more stock, which dilutes the value of each share, unless they want to broaden their ownership thus reducing individual risk.

For instance, I bought Micro-soft when it was quite cheap back around 1990. The stock became popular which drove the price up and kept small investors out. Microsoft split the shares to lower their price and broaden their base. One of my shares became two but each share was worth less. The stock remained strong and grew back up to its original price quickly. We were all happy.

That's accurate.

[Gaspar]

When they split stock it isn't the same as issuing more shares and diluting.  Your 2 stocks worth $1 are now 4 stocks worth $1.  If you have 1 company with 1 share of stock worth $100 and you decide you are going to issue another share that 1 share would then be worth $50.  I believe that credit rating (which translates to ability to borrow) is changed by your companies market value compared to amount of debt. 

That is not accurate.

[Red Arrow]

Inflation is one solution to our debt problem.

You are obviously not on a fixed income.

[AquaMan]

I would argue that a compay would have a market value if the stock market didn't exist.  However, the benefit to the stock market value is the ability of individuals to buy into companies with good ideas that might not be making any cash.  At the same time, stock prices don't seem to match reality at all.  Kind of weird.

That's a strange comment. Of course a company has a market value with or without a stock market. Simply because some one may want to buy it or its assets or a part interest (share) of it. So yes its market value is directly determined by what someone would pay for all or any part of it. Just like my bicycle.

Stock prices merely reflect the ability of a company to make and share a profit within a set of rules that are prescribed by a marketplace. That market place in America is represented by organizations like the NYSE. They are like the bookies for sports. So, yes, stock prices do match reality. Sometimes it takes a fair amount of research to determine that. Even the companies that are not making cash may still be really good values for a buyer because of patents they may hold, research that is soon to come to fruition or a million other factors. And some companies that look good are really in deep trouble.

Kind of like dating isn't it?

[Gaspar]

Me thinks Mr. Sheen doesn't have much experience investing.

No offence Charles, we all need to start somewhere.  I stated investing when I was 20.  I wish I knew then what I know now!