Say a company has 1,000,000 shares. Forgetting about Preferred shares lets say a million is the amount traded.
I buy 100 shares.
Is there now only 999,900 shares that are traded?
Or do I never actually own shares?
What do you mean by “traded?” Are you talking about the trading volume each day, or the total shares of a company that exist?
IIRC. “traded” means as opposed to bought and held by the company itself.
Shared that others own are considered as being traded.
Not to be confuse with volume of shares traded today or this month…
So, yes.
Recall an earlier thread about “what if a company buys all its shares?”
Shares owned by the company itself are not eligible to be voted.
occasionally a company will buy back shares, to help boost the price, to give to employees as bonus, etc. A company (i.e. executives of the company) cannot vote shares held by the company. therefore, the traded shares are the only ones that can vote at stockholder meetings, including your 100.
There are several meanings behind the word “trading” in the sense that shares are “traded”.
The first is market capitalisation. Market capitalisation is, in simoplified terms, the aggregate value of all shares outstanding, i.e. the number of shares outstanding multiplied by the value of each share. Market capitalisation doesn’t decrease as a result of your purchase, because the shares you bought are still considered shares outstandingh; but for instance, if the company were to buy back some of its shares, then these shares would not be shares outstanding any more, so market capitalisation would decrease (assuming that the share price stays constant).
Another parameter you’re looking at is actual trade volume, i.e., the number of shares traded per time unit (e.g. per day). Your transaction would increase trade volume for the day it took place by 100. As soon as you sell them, they, again, increase trade volume by 100. If they are bought and sold ten times in the same day, they increase trade volume for that day by 1,000. As long as you keep them, they can, by necessity, not count towards the trade volume, so that figure is not constant.
Just to clarify.
One Million is all the shares that exist for this company.
After I buy my 100 shares does that only leave 999,900 that other people are allowed to buy?
You own the shares. And they have a value until the company goes bankrupt – but not if it merges. I used to work in a brokerage and they’d occasionally have to look up shares for a long defunct company to see if they were still valuable. An early auto company, for instance, might have been bought up by General Motors and its stock was convertible into GM stock. This is less likely for modern stocks, which don’t usually have stock certificates.
Stocks are traded when someone buys or sells them. They are called “outstanding” if they’re untouched in someone’s portfolio – they count as stock for voting purposes. In the OP, the company has 1,000,000 shares outstanding, and the number traded varies each day (and more shares can be traded in a day than shares outstanding, since a share can trade hands more than once in a day.
The answer to the question is yes. A companie authorizes a finite number of shares of stock, which are first sold from the company directly to investors, then amongst investors.
For example:
Company A decides they want to become a publicly traded company. They authorize 1,000 shares at an estimated IPO (inital public offering) price of $10 per share. Assuming all goes well and they sell the entire allotment at their projected price, Company A, now a publicly owned corporation, has an additional $10,000 in the bank. If you bought 100 of those shares, that means other folk own the remaining 900. You can get certificate(s) printed if you wish, though most investors choose not to. Investors can now sell shares to each other, up to the total amount that they own. There are never more than 1,000 shares available, however - at least until the company authorizes more shares.
The term you are trying to find is the company’s “float.” That is the number of shares of stock that may be traded among the members of the public. It is basically all the shares that the company has issued minus restricted shares (generally stock that is held by corporate insiders, which can’t be readily sold) and treasury shares (shares the company issued and sold, but which it later bought back).
So you are talking about a company with 1,000,000 shares of float.
No, because they are still allowed to buy your shares. Sure, you have to agree to sell your 100 shares to those people, but that’s true of the shares you bought too. When you bought publicly-traded shares, you didn’t buy the stock directly from the company. You bought it in a secondary-market transaction from someone who was willing to sell the stock they owned to you. You are just buying your stock from whoever bought that stock before you and decided to sell it to you. It may have been a hundred or a million transactions ago that first owner bought that stock from the company.
I find this an odd question. It seems to me that the answer is perfectly obvious. If I create 100 shares in my company and sell 49 of them at $10 each (keeping 51 to retain control) I can use the $490 to expand the business. If I am successful, the value (ie - what others would be prepared to pay) of those shares might rise considerably (Microsoft anyone?). If I fail they could become worthless (Enron?). Either way, there would still only be 100 shares.
It occurs to me that the OP may think shares are like currency - Governments make their own rules and can print more banknotes - reducing their value. Companies are not allowed to just print more shares in the same way. If they did, they would soon go out of business, and, possibly, to prison.
Your answer doesn’t really address my question.
Really my question was: can shares I purchased still be traded around while I maintain ownership, or do the 100 shares I own remain that way.
I know one million is the maximum shares the company has.
But it seems to me like you could get in a weird situation where enough people own a stock that don’t sell and pretty much make purchasing impossible.
If the shares are owned by you, they can’t be sold to someone else and still be owned by you. It’s one or the other. Either you keep them, or you sell them and let them be bought by someone else (aka traded).
I may have misunderstood your question. The free capitalist market takes care of the problem you imagine. The public stock markets make it pretty clear what price is available if you want to sell your stock. They also let the holders of the 990,000 other shares know too. If someone wants to buy the stock, they will place an order. It can be either a market order or a limit order (an order that won’t execute unless the price is at a certain level or better). If the buyer places a market order, the price of the stock keeps moving higher until someone agrees to sell the shares. If you don’t want to sell at the price that’s available right now, then maybe the holders of some of the 990,000 other shares are willing to sell at that price. If the buyer places a limit order and no one sells him or her stock, then he can either set a higher limit offer or decide not to buy the shares.
Thanks! Ignorance fought
You’re welcome!
We didn’t even get into the complex situation where you (or your broker on your behalf) can agree to let someone borrow your shares while you still have economic exposure to the stock. That’s the complex and wonderful world of stock borrowing/lending and short selling. This system allows somebody who doesn’t even own the shares right now to borrow them from you and then sell them short if they think the price right now is very high. This means that the borrower/short seller can be the seller when the price gets high. He will have to pay for the privilege of borrowing the stock and he will eventually have to return the stock later but he can make money by selling high first and buying low later. He can also lose money if the price of the stock climbs even higher.
Well, usually the price will reflect that situation- just go try and get a share of Berkshire Hathaway. ($216,620 per share as of about 15 minutes ago).
How is that a weird situation? For huge companies with lots of stock I suspect it’s rare, as there’d always be someone who for some reason needs the cash. But the frequency of trades surely goes up and down and for smaller companies there’d be long periods where no one wants to sell at what potential buyers are currently offering.
That would be called an illiquid market.
They way it works (at least, for very large, publicly traded companies)
The company starts off with an IPO. Several big-name internet companies did this recently. So did Ali Baba from China. Basically, the people that own the company privately decide to sell shares. This process is HEAVILY regulated for larger companies, what you can and can’t say and do, whether the big shots can make special deals about their shares (typically they reserve some shares for themselves) is subject to all sorts of rules to prevent stock price hanky panky.
An initial IPO is essentially the private owners selling the right to own the company to 1,000,000 of their highest bidding friends. SO all the shares on the stock market were originally put there in one (or several) swell foop, and now are traded around. You don’t go to the company store and buy a few shares. A company board can sometimes vote to “print” additional shares, if they find it necessary to raise more money (plant expansion, etc.) or they can “split” the shares (you had 100? It’s now 200, and that goes for everyone) typically to keep the share price from getting too high. It’s a lot easier to sell $80 shares than $8,000 ones, so it’s a good idea to make the share volume such that the average investors can afford them. (Some “snob” companies keep their price deliberately high)
The IPO normally dumps hundreds of thousands of shares on the market, and big dealers typically get to bid on the shares in large chunks. So now all sorts of investors and speculators have gotten their hands on the shares, thanks to their deals with stockbrokers and banks handling the IPO. Many of these people are in it for a quick buck, so if the price is right (or drops too fast) they sell.
With thousands of people holding hundreds of thousands of shares, the odds someone will want to sell is pretty good. If not, someone will offer more and more money until someone decides “Yep, I’ll take that” and sells. The stock market is just a way to match offers to sell with offers to buy. (Usually with enough volume that you can get a good idea of the real market value)
Your 100 shares of stock is essentially a “deed” saying you own 100/1,000,000 of the company -you own it, it’s all yours. When it hands out profits, you get 100/1,000,000 of what it hands out. You own that until you sell it. Any trading that is happening is the remaining shares that are in play.
No, they’re allowed to buy your shares, because you’re allowed to sell them. There are still 1,000,000 shares in issue, and they are all tradeable.
Then the stock price goes up until either people start selling or potential buyers don’t want to raise their offer any more than they already have. (Echoing others, this is a completely normal market mechanism) And if sellers don’t want to sell, that’s fine as well, it’s completely within their rights.