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by EliRivers 3175 days ago
The majority of investors don't buy any of those things. The first time a share is sold, the company gets some money to spend on things - money to invest in the business in the hopes of creating new wealth. After that, the shares are being passed around. The company isn't seeing any more investment.
2 comments
ztjio 3175 days ago
Common misconception. You need to think not of only the initial sale, but, as the entire future ecosystem of that stock's purchase history as a kind of... pressurized plumbing system. If nobody bought the stocks from there on out, the original sale would have no value, it would be like capping a water spout at the spigot. All of that future trading acts as a low pressure vessel allowing the initial purchase to exist at all.

Incidentally, secondhand markets work the same way. When you have no possibility for a secondhand market you get a race to the bottom in value. Need evidence? See software markets, compare physical video game sales vs. mobile app store video game sales. The alternative we got? Consumable nothing. People convinced to spend money on literally nothing. Paying for the privilege to flip bits on a flash drive. Easily one of the worst markets to ever exist.

So yeah, stock sales are good for the initial investment needs.

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pg314 3175 days ago
> If nobody bought the stocks from there on out, the original sale would have no value

That is wrong. The value would be the NPV of all future income from those stocks. Being able to sell them easily increases the value a bit because of the increased flexibility, but the major source of the value of an investment is the stream of future income.

As an example, Warren Buffet has no intention of ever selling his stake in Coca-Cola, yet he is getting more than his original investment in dividends each year. Are you going to argue that his investment would be worthless if he weren't able to share his shares (which wouldn't change anything for him, because he never intends to sell them)?

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averagewall 3175 days ago
That passing shares around is necessary for the initial sale to get them any money. Nobody's going to buy a share they can't sell.
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pg314 3175 days ago
Incorrect. If the net present value of the future dividends exceeds the asking price by a sufficient margin of safety, I'll be happy to buy that share.
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averagewall 3175 days ago
Yes, you're right. I was thinking of no-dividend shares and the part of the value that comes from speculating on the future price.
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