The Stock Exchange is a market like any other, but in this one shares company shares.

Many people have misconceptions about the Stock Market because there have been many myths and legends around it. Is it a club where the rich get together to make money at the expense of others? Is it a place where speculators meet to try to bet with the shares of the companies listed on it? I have heard this and much more from some clueless readers.

Actually, it's nothing special. It is a market, like any other. But instead of meat, fruit or vegetables, shares of companies are bought and sold. But let's start from the beginning: why is there a stock market?

Many people aspire to have a business. Think for a moment that you are one of them. In this way, you have three options:

1. Start a business from scratch. In this case, you have to set up a company, either as sole owner or as a partner with friends or family. Many people put at least two partners, to use the figure of "joint stock company" which is quite popular, but there are many other options. The initial capital of the company is divided into shares, which represent the portion that each of the owners contributes or owns.
2. Buy a franchise or acquire an existing business. This also implies setting up a company or documenting the purchase before a notary, including the amount paid in exchange for receiving the shares that were in the hands of the previous owners.
3. Partner with someone who already has a successful business, who is doing well, but who requires more capital, than fresh money, to make it grow. Then you have to make a capital increase and issue new shares that represent your contribution. That makes you the owner of a proportional part of it.

When a company goes public, what it does is precisely seek capital. Fresh money It could do it through a private placement; that is, to find friends or acquaintances who want to enter and contribute money. But many times it is easier to make a public offer, in such a way that all the people who are interested in investing in that company can do so.

This public offering is made through a Stock Exchange. When you want to buy shoes you go to a shoe store (or a department store that has, precisely, a shoe department); when you want to buy securities you have to go to the specialized store that is the Stock Exchange.

Why? By making a public offering of shares, the company becomes a public company. This means that any interested person can obtain information about their results, the performance of the business.

The company has to publicly share its results and financial statements on a quarterly and annual basis so that any shareholder - or future investor - has knowledge of how the business is going.

But also anyone who bought shares in that company can sell them later, if desired, to other interested investors. This is done in the specialized store, in the market where people who want to buy meat, with those who are willing to sell. That place, again, is the Stock Exchange.

That is why the companies that issued shares through public offer have to list them in the Stock Exchange and are obliged to give the information mentioned. In this way, everyone can have reliable elements that allow them to evaluate the convenience of buying or selling an action.

Some companies reinvest their profits in business growth. Others have as a policy to distribute a part of them to their shareholders: to all and therefore offer dividends. On the other hand, when the company grows in sales and results, it becomes more valuable and therefore its actions tend to increase in price.

Now, although in the market there are many long-term investors, business savvy and looking to invest in a company because of its merits, because of its fundamentals, there are others who are more speculators, who seek to buy and sell shares every day to make fast profits

That is why prices have a lot of short-term volatility since both buyers and sellers freely set their positions: at what price they are willing to buy or sell them. When there is a match, the operations are executed.

 

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by Rashis via Everyone's ADM Blog Posts - Automotive Digital Marketing