# What happens to the stock market money? **URL:** \ **Category:** Miscellaneous and Personal Stuff I Must Share\ **Created:** [March 11, 2000, 1:25am UTC](https://boards.straightdope.com/t/what-happens-to-the-stock-market-money/14631 "2000-03-11T01:25:00Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![handy](https://avatars.discourse-cdn.com/v4/letter/h/b5a626/32.png) [@handy](https://boards.straightdope.com/u/handy)\ **Post date:** [March 11, 2000, 1:25am UTC](https://boards.straightdope.com/t/what-happens-to-the-stock-market-money/14631/1 "2000-03-11T01:25:00Z")
You buy ten shares of stock at $100 a share, for $1000, who gets the $1000? I know you mail the money to someone but does the company you bought stock in get the $1000? If the stock raises in value where does the extra money come from? Guess Im just trying to find out where the big money pool is for all those stocks. ---
**Author:** ![tenspeedjohn](https://avatars.discourse-cdn.com/v4/letter/t/439d5e/32.png) [@tenspeedjohn](https://boards.straightdope.com/u/tenspeedjohn)\ **Post date:** [March 11, 2000, 1:30am UTC](https://boards.straightdope.com/t/what-happens-to-the-stock-market-money/14631/2 "2000-03-11T01:30:00Z")
Allow me to be the first: Huh? * * * If chickens could pee, they would be wet on the bottom. ---
**Author:** ![Flang\_Dang](https://avatars.discourse-cdn.com/v4/letter/f/a88e4f/32.png) [@Flang\_Dang](https://boards.straightdope.com/u/Flang_Dang)\ **Post date:** [March 11, 2000, 1:33am UTC](https://boards.straightdope.com/t/what-happens-to-the-stock-market-money/14631/3 "2000-03-11T01:33:00Z")
Thanks a bunch, 2S. I appreciate the reminder to get Black Ice, and it’s nice of you to point us to that site. * * * “Did you ever wake up, Bullfrogs on your mind?” - Wm Harris ---
**Author:** ![tenspeedjohn](https://avatars.discourse-cdn.com/v4/letter/t/439d5e/32.png) [@tenspeedjohn](https://boards.straightdope.com/u/tenspeedjohn)\ **Post date:** [March 11, 2000, 1:35am UTC](https://boards.straightdope.com/t/what-happens-to-the-stock-market-money/14631/4 "2000-03-11T01:35:00Z")
That was wierd, I clicked on this topic and another thread came up. Yeah, the company gets the money, minus the broker fee. When the stock goes up, people are paying more per share than you did. That’s where the money comes from. * * * If chickens could pee, they would be wet on the bottom. ---
**Author:** ![Michael\_Masterson](https://avatars.discourse-cdn.com/v4/letter/m/53a042/32.png) [@Michael\_Masterson](https://boards.straightdope.com/u/Michael_Masterson)\ **Post date:** [March 11, 2000, 1:40am UTC](https://boards.straightdope.com/t/what-happens-to-the-stock-market-money/14631/5 "2000-03-11T01:40:00Z")
Dude, when you buy into a stock your giving the company your money (i.e. investing in their future). I suppose you never took economics, handy. I think they might have a book called “The Stock Market for Dummies,” go buy it. Then after you read it, post a more serious stock market question and I will give you the answer. * * * ~-MCM-~ ---
**Author:** ![system](https://global.discourse-cdn.com/straightdope/original/2X/e/e489c3b7d8fce19c4b355dd4fc3f88cc39c34b87.png) [@system](https://boards.straightdope.com/u/system)\ **Post date:** [March 11, 2000, 1:43am UTC](https://boards.straightdope.com/t/what-happens-to-the-stock-market-money/14631/6 "2000-03-11T01:43:00Z")
If I own those ten shares of stock, and I sell them to you, then of course I get the money, minus brokerage fees. Sometimes you can buy stock directly from the company; this happens when a company is trying to raise money for a new venture, for example. The “extra money” reflects the value that people place on the stock, based on how profitable the company is or is expected to be. When you own a share of a company, you own part of the company, so you’d generally like for it to be quite profitable. I’m gonna email this thread to Manhattan, since this is his area of expertise. -Melin * * * **Voted Best Moderator (Emeritus)** ---
**Author:** ![Dr.Watson](https://avatars.discourse-cdn.com/v4/letter/d/6a8cbe/32.png) [@Dr.Watson](https://boards.straightdope.com/u/Dr.Watson)\ **Post date:** [March 11, 2000, 1:46am UTC](https://boards.straightdope.com/t/what-happens-to-the-stock-market-money/14631/7 "2000-03-11T01:46:00Z")
Um, no. The company doesn’t get the money except in an IPO and the issuance of additional stock. Even then the money doesn’t go directly to the company, but to the underwriter of the stock issue (with the lion’s share accruing to the issuing company). In day to day stock trading the money goes to the fella what calls his broker and screams, “SELL!”, and is paid by the fella what calls his broker and screams, “BUY!” This is a gross oversimplification, of course, but geez, it ain’t like this is GQ or anything . . . Dr. Watson “Money never goes to jail.” ---
**Author:** ![Flang\_Dang](https://avatars.discourse-cdn.com/v4/letter/f/a88e4f/32.png) [@Flang\_Dang](https://boards.straightdope.com/u/Flang_Dang)\ **Post date:** [March 11, 2000, 1:48am UTC](https://boards.straightdope.com/t/what-happens-to-the-stock-market-money/14631/8 "2000-03-11T01:48:00Z")
Sorry, handy. That was some real weirdness that put that last post here. As to your OP, I’m invested in the market, but any explanation I’d attempt would do you or anyone else no good, I’m sure. I have 2 stocks, they’ve both gone crazy, I’m very fortunate on one and wildly lucky on the other. * * * “Did you ever wake up, Bullfrogs on your mind?” - Wm Harris ---
**Author:** ![RealityChuck](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/realitychuck/32/195_2.png) [@RealityChuck](https://boards.straightdope.com/u/RealityChuck)\ **Post date:** [March 11, 2000, 2:39am UTC](https://boards.straightdope.com/t/what-happens-to-the-stock-market-money/14631/9 "2000-03-11T02:39:00Z")
The company only gets the money when it issues stock, either as as IPO (Initial public offering) or as a new issue. After that, the money is paid between investors. So if you buy a stock at $50, that money (minus commission) goes to the investor who holds the shares. When you sell the stock at $85, you get paid by the sucker who was willing to pay $85 for it (minus commissions). ## The extra value is created because the new investor wants the stock so much that he’ll pay more for it than you did (ideally). The market is fueled by the perception of the value of the stocks in it. That perception doesn’t have to have any connection with reality. “What we have here is failure to communicate.” – Strother Martin, anticipating the Internet. [www.sff.net/people/rothman](http://www.sff.net/people/rothman) ---
**Author:** ![RTFirefly](https://avatars.discourse-cdn.com/v4/letter/r/c77e96/32.png) [@RTFirefly](https://boards.straightdope.com/u/RTFirefly)\ **Post date:** [March 11, 2000, 3:45am UTC](https://boards.straightdope.com/t/what-happens-to-the-stock-market-money/14631/10 "2000-03-11T03:45:00Z")
> [@](#): > > Originally posted by Michael Masterson: > Dude, when you buy into a stock your giving the company your money (i.e. investing in their future). I suppose you never took economics, handy. I think they might have a book called “The Stock Market for Dummies,” go buy it. Then after you read it, could you please explain it to me??? OK, so I changed the ending just a tad. 😃 * * * Enough of voting for the _lesser_ of evils - vote Cthulhu 2000! ---
**Author:** ![Dr.Watson](https://avatars.discourse-cdn.com/v4/letter/d/6a8cbe/32.png) [@Dr.Watson](https://boards.straightdope.com/u/Dr.Watson)\ **Post date:** [March 11, 2000, 4:15am UTC](https://boards.straightdope.com/t/what-happens-to-the-stock-market-money/14631/11 "2000-03-11T04:15:00Z")
Damn. I bit me tongue so damned hard to avoid speakin’ nearly the mirror image of yer post **RT** , but I suppose I must now give in – Yo MM! Were I you (and thank the Gods I’m not), I’d be studiously avoiding the observation of the lack of education ye perceive in others. Putz. Dr. Watson “Current Score: Wally Brigade 2, Putzes 0.” ---
**Author:** ![Michael\_Masterson](https://avatars.discourse-cdn.com/v4/letter/m/53a042/32.png) [@Michael\_Masterson](https://boards.straightdope.com/u/Michael_Masterson)\ **Post date:** [March 11, 2000, 5:08am UTC](https://boards.straightdope.com/t/what-happens-to-the-stock-market-money/14631/12 "2000-03-11T05:08:00Z")
Dr. Watson (are you a butt-doctor? or do you have a Phd. in basket weaving) I know the stock market like the back of my hand. I have made a personal fortune. I have helped make my parents a lot of money too in the stock market. How have you done? ---
**Author:** ![Yamen\_runner](https://avatars.discourse-cdn.com/v4/letter/y/9fc29f/32.png) [@Yamen\_runner](https://boards.straightdope.com/u/Yamen_runner)\ **Post date:** [March 11, 2000, 5:15am UTC](https://boards.straightdope.com/t/what-happens-to-the-stock-market-money/14631/13 "2000-03-11T05:15:00Z")
mikie - your a perfect example of someone being so fucking stupid they don’t have a clue. In a few years you’ll be a Small Man. ---
**Author:** ![Dr.Watson](https://avatars.discourse-cdn.com/v4/letter/d/6a8cbe/32.png) [@Dr.Watson](https://boards.straightdope.com/u/Dr.Watson)\ **Post date:** [March 11, 2000, 5:22am UTC](https://boards.straightdope.com/t/what-happens-to-the-stock-market-money/14631/14 "2000-03-11T05:22:00Z")
I’ll just throw this one open to the wisdom of my fellow board members. Ye’ve usually proven wiser than I – So I’ll simply ask, May I? Dr. Watson “I don’t know much about Art, but then, I’ve never met the fella.” ---
**Author:** ![neutron\_star](https://avatars.discourse-cdn.com/v4/letter/n/51bf81/32.png) [@neutron\_star](https://boards.straightdope.com/u/neutron_star)\ **Post date:** [March 11, 2000, 8:14am UTC](https://boards.straightdope.com/t/what-happens-to-the-stock-market-money/14631/15 "2000-03-11T08:14:00Z")
Handy, you can find an interesting tutorial on how the stock market works [here](http://www.howstuffworks.com/stock.htm). * * * “Honey we’re recovering Christians.” –Tori Amos - _In the Springtime of his Voodoo_ ---
**Author:** ![Major\_Feelgud](https://avatars.discourse-cdn.com/v4/letter/m/3be4f8/32.png) [@Major\_Feelgud](https://boards.straightdope.com/u/Major_Feelgud)\ **Post date:** [March 11, 2000, 9:20am UTC](https://boards.straightdope.com/t/what-happens-to-the-stock-market-money/14631/16 "2000-03-11T09:20:00Z")
What I want to know is, after a succesful IPO, company X is now worth 2.5 billion dollars. Where the heck did all this money come from? ---
**Author:** ![Bricker](https://avatars.discourse-cdn.com/v4/letter/b/977dab/32.png) [@Bricker](https://boards.straightdope.com/u/Bricker)\ **Post date:** [March 11, 2000, 10:55am UTC](https://boards.straightdope.com/t/what-happens-to-the-stock-market-money/14631/17 "2000-03-11T10:55:00Z")
> [@](#): > > Originally posted by Michael Masterson: > Dude, when you buy into a stock your giving the company your money (i.e. investing in their future). I suppose you never took economics, handy. I think they might have a book called “The Stock Market for Dummies,” go buy it. Then after you read it, post a more serious stock market question and I will give you the answer. > [@](#): > > Dr. Watson (are you a butt-doctor? or do you have a Phd. in basket weaving) I know the stock market like the back of my hand. I have made a personal fortune. I have helped make my parents a lot of money too in the stock market. How have you done? \*\* Michael, Not that this will make any difference in your powerful affection for the ridiculous, but only in a very few cases does the company “get the money” when an individual buys stock. The classic case is an IPO, or “Initial Public Offering”. This is the event in which a company first sells shares to the public. It is true that during this time, you are “investing in their future” and giving them your money. But what if I come along a month later, and wish to buy stock? Where does my money go? Well, it doesn’t go to the company, since they’ve presuambly sold all the stock they were offering to the public. Instead, it goes to someone who bought the stock during the IPO! And when I sell my shares, a month later, I get the money that the NEXT guy is using to buy shares. Now, companies may issue new blocks of stock, and buy and sell their own shares. In fact, one promising investment technique is to watch for companies buying their own shares back. This sometimes indicates a belief that they expect some event to drive up their stock price. So – if a company’s stock was at $10 per share last month, and $30 per share today, where did the extra money come from? It came from the company getting more valuable over the last month. How does this happen? Well, there could be a rational reason: perhaps the company just announced that it won a huge contract to sell toilet seats to the Department of Defense. People hear that and reason that a company in such an enviable position is sure to make money. When a company makes money, its owners make money. As a shareholder, you own a tiny chunk of the comapny. The company may actually pay you your fair share of their profits. This is called a “dividend” payment. If a company is going to pay a good dividend, people want to own the stock. Or it could be an _irrational_ reason: people could be trying to buy the shares at $30 today because they are convinced that next month, they will be able to sell them for $50. And the $50 buyers next month might be quite willing to pay that, because they believe they can sell their shares for $70 the following month! (This is sometimes called the Greater Fool Theory: “I may be a great fool for paying this price, but I’ll do it, because I’m sure there is a _greater fool_ somewhere willing to pay even more.”) Still confused about “where the money comes from?” Consider this scenario: I stop by a garage sale, where I buy two amateur paintings from struggling artist Joe Blow for $50 each. I keep them for ten years. Meanwhile, the artist has become successful and well known, and then dies! My paintings are now “early Blow” and collectors offer me $50,000 each for them. I sell them. Where did the extra money come from? - Rick ---
**Author:** ![Gazoo](https://avatars.discourse-cdn.com/v4/letter/g/ce73a5/32.png) [@Gazoo](https://boards.straightdope.com/u/Gazoo)\ **Post date:** [March 11, 2000, 2:18pm UTC](https://boards.straightdope.com/t/what-happens-to-the-stock-market-money/14631/18 "2000-03-11T14:18:00Z")
> [@](#): > > Originally posted by Michael Masterson: > \*\*Then after you read it, post a more serious stock market question and I will give you the answer. > > (Pasted from Michael’s Profile): > Occupation: Musician, Student, Construction > \*\* Thanks, but I’d rather get my stock information from someone in the business. ---
**Author:** ![handy](https://avatars.discourse-cdn.com/v4/letter/h/b5a626/32.png) [@handy](https://boards.straightdope.com/u/handy)\ **Post date:** [March 11, 2000, 4:26pm UTC](https://boards.straightdope.com/t/what-happens-to-the-stock-market-money/14631/19 "2000-03-11T16:26:00Z")
Bricker, that pretty much sums it all up. Although Im still a bit dizzy reading all the other posts 🙂 MM, I don’t know why you are bragging about your stocks. The market has fallen about 1000 points since you told us you have 1.2M in stocks. And they aren’t worth anymore than someone would pay for them when you sell them. Which brings that Palm gizmo to mind. IPO of about $67B the other day. Some say a bit too much. ---
**Author:** ![Akatsukami](https://avatars.discourse-cdn.com/v4/letter/a/ea666f/32.png) [@Akatsukami](https://boards.straightdope.com/u/Akatsukami)\ **Post date:** [March 11, 2000, 4:28pm UTC](https://boards.straightdope.com/t/what-happens-to-the-stock-market-money/14631/20 "2000-03-11T16:28:00Z")
The universally well-liked and well-respected **Michael Masterson** writes: > [@](#): > > I have helped make my parents a lot of money too in the stock market. Every Mike recommends a stock, his parents short it. (Should this have gone in the Pit? Possibly; mea culpa, mea culpa, mea maxima culpa. OTOH, I never _could_ resist that obvious a straight line.) * * * “I don’t just want you to feel envy. I want you to suffer, I want you to bleed, I want you to die a little bit each day. And I want you to thank me for it.” – What “Let’s just be friends” _really_ means [Next page](https://boards.straightdope.com/t/what-happens-to-the-stock-market-money/14631.md?page=2)