Issuing and trading shares: who receives the money?
What you will learn
Explain the example in your own words and check the calculation.
Issuing new shares can raise money for a company. In trading between investors, the seller usually receives the money.
Tradable shares allow investors to buy and sell on the market. Public companies have reporting obligations, but reporting and oversight do not guarantee success. A private company is not necessarily small, and a public company is not necessarily government-owned. Trading between investors is not always new money entering the company.
Buying from another investor on the stock exchange usually transfers the proceeds to the seller. Issuing new shares by the company can raise money for the company.
Explain the example in your own words and check the calculation.
A company can be well known without its shares trading on an exchange. Make a fictional information card: who owns it, can the public trade its shares, and what information is published? Employee numbers and store size do not answer every question. Published reports are material to examine, not a profit guarantee; they may describe debt, expenses and risks as well as business achievements.
Concepts that help you compare
Stock: a small piece of a company
A stock is a share of ownership in a company. A stock’s price changes in the market and is not a promise of future value. A company may distribute part of its profits as a dividend, but it is not required to do so. You can gain from a price increase or lose from a price drop; in an extreme case you can lose your entire investment.
Comparison example: If you bought two shares at 50 ₪ each, the cost is 100 ₪ before fees.
Private and public describe a legal status related to the company's shares; Ltd. describes liability, not the same classification. A public company is, according to the statutory definition, a company whose shares are registered for trading on the stock exchange or were offered to the public pursuant to a prospectus and are held by the public. A private company is a company that is not public. A large company can be private, and a public company is not necessarily government-owned. A private company can also be an Ltd. There are different reporting and regulatory obligations; a private company may have additional reporting obligations, for example when it issues bonds to the public. Public classification is not a guarantee of profit or investment safety.
Comparison example: A fictional company has thousands of employees but its shares are held privately. The number of employees alone does not make it public.