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The cash one exchanges for shares of a public company is usually spent on paying wages, buying equipment, funding R&D etc, thus enabling future growth. If one
by aleh 11y ago
The cash one exchanges for shares of a public company is usually spent on paying wages, buying equipment, funding R&D etc, thus enabling future growth.
If one happens to invest into the inefficient company in a long term it is going to be bust along with investor.
How comes this is not productive?
- jonknee 11y agoWhen you buy a share of SPY you're not paying that cash to all the S&P 500 companies, you're paying it to another party that already has a share of SPY. IPOs give money to companies, but trading shares between parties does nothing for the company and contributes $0 to wages, equipment, R&D, etc. I own shares of SPY, if I sell them to you what exactly changes?
- refurb 11y agoYes, the cash doesn't go directly from you to the company, but you're creating a market by which a company can raise funds through a stock offering. Take away the market and the company wouldn't get any money.