[alkonaut]

If they bought the stock they are helping fund the business. The shareholders are keeping the stock because it represents their stake but the actual money paid can be used by the company selling its stock and that’s the primary purpose. Whether the buyer/investor votes, or knows what they bought, doesn’t change anything in that respect.

[ragnese]

Well, of course there are other subtleties involved, but even the money that I pay for a given stock doesn't just go to the company unless it's an IPO. It might indirectly benefit the company because I'm adding to the demand and driving the stock price up, which helps all holders of the stock, including the company that issued the stock originally.

However, my point is that people are not buying stocks to own OR to benefit the company. They're buying stock so that a "bigger sucker" will come around later and buy it from them and they can make a profit.

So I guess it depends on who we're talking about when we say "primary purpose", but for anyone who is purchasing stocks, the primary purpose is NOT to be an owner of a company. The primary purpose is to speculate.

[saalweachter]

A trillion dollars a year are disbursed by the companies of the S&P 500 to their shareholders, in the form of dividends and stock buybacks. Berkshire Hathaway itself bought back $25B of its stock in 2020.

[ragnese]

Buybacks absolutely count under speculation-then-bigger-sucker.

[saalweachter]

The difference between a stock buyback and iterative speculation is that the "bigger sucker" in a stock buyback is the customer interested in the actual product being sold by the company.

[tromp]

If you buy into an IPO you're helping the business raise funds. If you buy stock from other stock owners it doesn't help the business.

[robjan]

The existence of a secondary market helps the business to sell their IPO in the first place. Additionally they can raise more funds by selling additional shares.

Additionally the people who own shares own the company so what benefits the shareholders benefits the company and vice versa as their interests are the same.

[maxqin1]

> If you buy stock from other stock owners it doesn't help the business

Incorrect. That's what keeps the market for the stock liquid, and that contributes to value which the company can exploit through future stock issuing. Not to mention the indirect benefits to stakeholders within the company in terms of price and liquidity.

[tromp]

If I buy the stock in order to hold it for 30 years, doesn't that reduce liquidity?

[maxqin1]

No, because your holding increases the price until someone else decides it's time to tell. In other words, the lack of liquidity increases price. Regarding your original question, that increase is GOOD for the company because it can raise more money for selling the same amount of stock.

[tromp]

You cannot argue that buying raises the price and selling drops it, since every trade has a buyer and s seller.