I asked AI this question:
if apple stock dropped from $220. down to $20., where did the $200. go?

AI Overview:
When Apple stock drops from $220 to $20, that missing $200 per share did not go into a bank account or pocket.
It simply vanished.
That loss represents a drop in market value, meaning investors collectively agree that the company is worth less, erasing paper wealth.
Why Value ChangesPaper Wealth: The $220 price was just a label. It showed what one person last paid for a single share.No Physical Cash: No actual cash pile shrank or moved anywhere when the price went down.
Lower Demand: Fewer people wanted to buy the stock. Sellers had to lower their asking price to find any buyers.

Who is Affected?
Shareholders: People who own the stock see the total value of their holdings go down.
The Company: Apple does not lose actual cash from a stock drop. The lower price just makes it harder to raise new money by selling fresh stock.
End Quote.

If Apple does not lose money from a stock drop, how do they "raise" money by selling fresh stock?
$200. simply vanished and the company doesn't lose money?

Not a rant from me, just something my simple mind does not understand .

It's all perceived value -- beauty in the eye of the holders. Possibly many holders in the stock market. In other types of markets, the number of buyers & sellers can be limited.

Think of home ownership. Buy a home for $500k. For whatever reason the real estate market gets hot, and maybe the home could sell for $700k. Or maybe the local market gets cold because people are moving to Florida, and maybe the home now could sell for only $350k. What happened to the differences?

Think about gun ownership. Buy a transferrable full-auto rifle, say for $20k a while ago. Maybe it could be sold to the right buyer for $25k or $35k now. Or maybe buy that advertised super limited edition retro Sig, with pearl grips and rainbow slide for a cool $1500. Then realize that 5 years later it has a street value of $500. What happened to the differences?

A mentor once told me that market price is placing a perceived value of future utility of a thing.

are you trolling? I don't get your post.
The price of a stock is what people are willing to pay for it. No different than your car or your house or gun or anything else that is an asset. It can be up or down based on how people expect the stock to perform over time, price is always a future looking projection. if it generates any cash flow via dividends or other cash payouts that can affect that calculation. Apple currently pays a dividend so that goes into the yield calculation.
Apple per se does not benefit plus or minus based on its current stock price at least with respect to its financials and balance sheet. Investors lose or gain on paper but doesn't matter till you sell and then its a loss or gain.
If apple wants to raise capital via a stock sale they do so with the facts that the new price reflects the situation and share dilution means you won't even get that.

I don't think he's trolling, just not understanding that the stock is what an investor is willing to pay "for a piece of the action", (gambling), on the "payout", either through dividends or "cashing out" (selling their shares).


@rizzle

So, If I have $1 million dollars in company assets, cash, infrastructure, machines.
And I sell a share of stock for $1 to 1 million people in one day, my company now has $2million in value (the original $1 million in the first sentence, and the $1 million in cash raised on the sale of stock.

If tomorrow the stock tanks, the people with their $1 stock is now worth $0, so they have no value in that stock, yet I still have the $2 million, but good luck with me trying to sell goods or stock at yesterdays asking.

Not trolling, If I bought a house for $200k and it dropped to $100k. I lost money.
The $100k "vanished" and I lost money. For some reason I thought Apple would lose some.
Just a strange perspective on my part.
So, when Apple "raises" money, it is not really theirs to begin with.

(Former stockbroker) A company only makes money when it initially sells its stock (IPO), just like it was selling cars or anything else. What the stock does on the secondary market doesn't cause the company to gain or lose (well, maybe employees with stock options gain or lose, but not the company directly).

It's no different from selling cars. The company only makes money from the initial sale. Said car may be sold several times henceforth for varying market prices, up or down, but that second-hand trading no longer directly affects the manufacturer or its profit margins.

quote:

Originally posted by rizzle:
Not trolling, If I bought a house for $200k and it dropped to $100k. I lost money.

If you sold the house for $100k you had a realized loss of $100k. You had $200k at one time, you bought a thing for $200k, you sold that thing for $100k, now you only have $100k to buy other things.

If you still own the house, you have an unrealized loss of $100k. You had $200k at one time, you bought a thing for $200k. If you don't sell that thing, you still have it. The real question is if the thing still has utility for you, and if you have no intention of selling it in the near future. Then it's a unrealized or paper-only loss. However, if your house has debt attached to it, or if you intend to use the house for collateral for another purpose, then yes an unrealized loss can result in real-world problems.

quote:

Originally posted by sigmonkey:

@rizzle

So, If I have $1 million dollars in company assets, cash, infrastructure, machines.
And I sell a share of stock for $1 to 1 million people in one day, my company now has $2million in value (the original $1 million in the first sentence, and the $1 million in cash raised on the sale of stock.

If tomorrow the stock tanks, the people with their $1 stock is now worth $0, so they have no value in that stock, yet I still have the $2 million, but good luck with me trying to sell goods or stock at yesterdays asking.

Thanks sigmonkey, I did not realize that Apple would keep the (if I word this correctly) profit from the stock sales even though the value drops on the most recent high.

It is a racket basically now days. When it crashes we will all be toast. That's what I know.

quote:

Originally posted by rizzle:

Thanks sigmonkey, I did not realize that Apple would keep the (if I word this correctly) profit from the stock sales even though the value drops on the most recent high.

Apple only received money when additional shares were first released, at whatever price they were sold at.


Subsequent sales are an exchange between people an Apple isn’t involved.

I buy 100 shares @$100 each when Apple issues the stock. Apple gets $10000.

I sell those 100 shares at $120 to some random dude on the stock market. I get $12000. Apple doesn’t get any of that “extra” $2000.

Dude sells them when it’s down at $110/share. He has “lost” $1000. Apple still has their original $10000 and I still have my $2000 profit.

^^^ This.

When stock trades hands, one party believes it's time to get out, the other believes it's time to get in.

Thanks guys!

quote:

Originally posted by rizzle:
[QUOTE]Originally posted by sigmonkey:

@rizzle

So, If I have $1 million dollars in company assets, cash, infrastructure, machines.
And I sell a share of stock for $1 to 1 million people in one day, my company now has $2million in value (the original $1 million in the first sentence, and the $1 million in cash raised on the sale of stock.

No, it is no longer "your company," you sold it to 1 million people who each own 1/1,000,000 of the company. It is their company now.

quote:

If tomorrow the stock tanks, the people with their $1 stock is now worth $0, so they have no value in that stock, yet I still have the $2 million, but good luck with me trying to sell goods or stock at yesterdays asking.

No, you only have $1,000,000, the amount you received for selling your stock. You gave up your interest in the company at the time of the sale.

quote:

Thanks sigmonkey, I did not realize that Apple would keep the (if I word this correctly) profit from the stock sales even though the value drops on the most recent high.

It isn't "profit." When Apple issues stock, they are selling a fraction of the company to the stock's buyers. Yes, the company gets to add the receipts to their bank account, but there is an equal and corresponding loss to the value of the other shares that are held by the owners (those who have a stock position in the company). Since large public companies typically have millions of shares outstanding, this "dilution" is usually minimal.

There are other ways to value publicly-owned companies, e.g. the sum total of the assets they hold. This may, or may not agree with its share value (almost never), but it does affect the share price. The actual earnings (AKA profit) the company makes from operations is a much more influential factor, as is investors' predictions of future profit. Right now, many investors feel that AI will bring big changes in company's efficiency and profitability and therefore stock prices are inflated by these expectations.

Share price times the number of total shares issued equals what the "market" believes a company is worth. If that assumption goes down, due to a failed product launch or general business conditions, the value placed on each share goes down.

Still confused? Not surprising, it is a complicated subject, with many uncertainties. Add in classes of stock, futures, options, bonds, dividends, etc. and it only gets more complicated. Many many books have been written about the vagaries of the stock market, and many people spend their lives trying to learn all the nuances with little success. Theory does not always agree with reality in the world of investments.

In the end, it probably doesn't matter. I don't know of a study that confirms that those knowledgeable about the market do better in their investments than those who just "go with the flow," but I would tend to doubt it. You don't have to understand every detail about investing for it to not be a good idea for future financial stability.

quote:

If Apple does not lose money from a stock drop, how do they "raise" money by selling fresh stock?
$200. simply vanished and the company doesn't lose money?

They can, and companies frequently do, "follow on offerings" of fresh, newly printed stock. That money does go to the company.

However, the newly printed stock dilutes the current stock so existing shareholders have a reduced ownership interest because they now share ownership with the new shareholders.

For this reason, the stock price frequently falls when a "follow-on offering" is announced.

Rizzle’s lack of understanding of how the stock market works is a prime example of what is no longer being taught in high schools, much less college.

This thing came about from watching a rise and fall video of Buffalo NY. Everything was super fine and dandy until the big market crash in the late 20's.
A lot of big businesses closed down, and I thought the reason they lost money was that the stocks crashed, and that it was company money lost from stock value.

quote:

Originally posted by architect:...

At the point the stock becomes worthless, the people, while stockholders have equity, the company with 2 million in assets owes them zero and has no duty to the stockholders for their loss of value of the stock.

It was a simple analogy to explain "where did the money go when the stock went down". It did not go anywhere, the people gave money for a lottery ticket. They still have their ticket, but it now has no value.
Stockholders are not held to the liabilities of the company, and the company has no duty to the loss of the value. (but they still had the responsibility to manage the company with equal consideration to all stockholders)


Beyond answering the OP's question, it has a whole lot of moving parts and complexity, and I wasn't ever going to expound upon that.

Sort of the meme of the parent taking a third of a kids candy and telling them that's the way taxes work.

It is a great deal more than that and not exactly factual, but it gets the point across.

quote:

Originally posted by old rugged cross:
When it crashes we will all be toast. That's what I know.

A true market crash hasn’t occurred since 1929. Many things have changed in the past century. Corrections and bear markets occur regularly, historically every few years. Dozens have occurred over the past 75 years.

We recently experienced a big one – the 2020 COVID crash/correction/bear market. Worst inflation in 41 years. Worst combined performance of balanced stock/bond portfolios in 75 years. The economy survived.

Previous nasty times include the 2008-2009 global financial crisis, the 2001-2002 Dot-com crash, the 1973 oil crisis, the 1987 Black Monday crash, a nasty recession in 1980-1981, stagflation in the 1970s, and a number of issues in the 1950s and 1960s. The economy survived each one.

Financial diversification gets folks through challenging times. The long-run approach to investing has shown success for folks from all levels of net worth.

quote:

No, it is no longer "your company," you sold it to 1 million people who each own 1/1,000,000 of the company. It is their company now.

Not necessarily, it depends on how many total shares were issued when the company was founded. When it started, or later on by board decree, the total shares could be 4 million, and the board has agreed to sell 1 million to raise capital for operations.

So you don't lose control in that situation, the company now has shareholder investors who make up 25% of the stock. Shareholder voting will be determined by stock type and the bylaws of the company, but that block could vote to get a seat on the board with that percentage.

Selling stock privately or publicly doesn't mean the company sold EVERY share

I'm pretty sure that they simplified the answers for me and did not get into great detail. Which is absolutely fine with me.