Money Forum World

Interwest · Joined: 08 Nov 2007 Posts: 2121

Are there a restricted amount of stocks sold firstly by a company going public?
Is there a bound to what is sold? Can a company at any time choose to not sell any more shares? When stocks are bought are they from the company only? I know people sell shares but are they sold back to the company or to persons meeting the asking price.

Minnie Anderson · Joined: 08 Nov 2007 Posts: 2138

Yes, there are a restricted number which is typically established by investment bankers and accountants depending on the valuation of the company. A company can stop issueing new stock, but present stock can generally be traded on the open marked. Once sold, the company not owns the stock. They use the stock sale to increase money, typically for capital expansion. businesses on occasion choose to purchase shares back, in which case they act just like a person or institution purchasing stock. Stocks are bought and sold on the market at the price which the market and the businesses profitability or prospects dictate.

Jonathan · Joined: 08 Nov 2007 Posts: 2155

The bound on the amount of stocks firstly sold will rely on the valuation of the company and the marketing approach devised by its investment bankers. Lets take a simple example. A company is valued to be worth $100 depending on its potential income. The investment bankers choose that they want the initial offering price of the shares to be no less than $1.00. In this case, they'll sell the company to stockholders by issuing 100 shares at $1.00 each. Had they decided to price the initial shares at 50 cents, they could issued 200 shares instead.

The initial stock offering represents a commitment. Using the example above, in midstream the company couldn't choose to stop issuing and selling shares after the 1st 50. That could be breaking its contracts with the investment bankers who market these shares to the investment community.

After the initial public offering, the company can choose to not issue anymore shares. And, thats good but not likely. Growing businesses frequently need extra equity capital to grow their business.

The only time stocks are in essence bought from the company is when the company issues new stocks either firstly or afterward on . Otherwise, at all other time stocks are really traded between purchasers and sellers who are investors dealing through their brokers. If you purchase a part of IBM through Charles Schwab, Schwab sells the stock to you. They in turn bought the stock from someone else, as they as a dealer don't take a position in IBM. And, IBM has a company won't received a penny on these stock transactions.

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