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How a Company Benefits from the Stock Market - YouTube
Channel: ClayTrader
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got a great question from a youtube
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subscriber kind of how does a stock
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market work for more so the company
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angle so this is definitely more of an
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advanced topic but if you're still new
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to the markets and you want to get kind
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of that next layer in then yeah how do
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companies make money from the stock
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market I already offered up a little
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reminder but if you don't even know what
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the stock market is I offer other videos
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for that so make sure to go through that
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playlist of the trading 101 but this is
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like I said more for ok yeah I know what
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the stock market is and I get the very
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surface deep of what companies you know
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why they would do it but what about that
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next level how exactly is a company
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benefiting from all this so let's first
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get to that comment and you can see what
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kind of got you know this ball rolling
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in my mind up all right yeah that's
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actually a good question so I want to do
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a video on it so let's get to the
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comment and again it comes from YouTube
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so this person says I see how the
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investors make money or lose but how is
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the company affected I mean once all the
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shares are bought at some initial price
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here the company makes some money are
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those shares just traded from one person
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to the next
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and not affecting the company anymore
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going forward I want to focus on one
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word and that word is flexibil it t I am
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NOT the greatest speller I think I
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spelled it right though flexibility what
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do I mean by that well as this person
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alluded to and like I said if you have a
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very basic understand the market the
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whole reason a company goes public is to
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raise capital meaning they are giving
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away portions of their company if you
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did watched in my original video you
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know they are slicing their company up
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in two slices of pizza and then selling
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off pieces of pizza and for each one of
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those pieces of pizza ya they're gonna
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bring in some amount of money but as
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this person says all right yeah I get
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that they're selling off initial slices
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of the pizza initial portions of their
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company they're getting money for that
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but then what happens after that
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well yeah that's the market is just
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trading back and forth buyers and
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sellers and values we're gonna go up and
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down again I have more videos on what
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exactly is determining those prices but
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just it's a free market supply and
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demand of those prices but what's in it
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for the company how is the company
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affected of that well the other key word
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here is
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value that is how the company is
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affected in kind of an indirect way
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because it matters but then it doesn't
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matter the flexibility is a little bit
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more practical and I'll get to in a
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second but value obviously if a
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company's stock price is really really
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high then that means her value is going
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up that much more I mean the higher as
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price goes the more and more value
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people have associated with that company
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hopefully that makes sense I mean if
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something anything in life if someone
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were to tell you yeah that that keeps
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going up in value you're thinking oh
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well people must be feeling very good
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about that so that is what the shares
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out there doing the more people want to
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buy and the higher prices go then people
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said well that company is getting more
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and more valuable there's more value
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associated with it but why does this
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matter why do why does a higher value
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meaning higher share prices so if ABC
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goes from let's just say $20 and now of
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a sudden it rises in value and now those
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shares are sitting at $45 what does that
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allow them to do well they can get
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they're getting flexibility in terms of
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you know what I see company XYZ down
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here and yeah they're kind of maybe a
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future competitor or maybe I just that
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make could be a great synergy with it
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but for whatever reason they have a guy
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on XYZ in in the way the stock market
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works is you have companies that go out
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and they buy other companies so if ABC
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wants to go and buy XYZ a lot of times
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they will use their own stock to buy a
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company usually it's a combination of
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both cash and stock but they're usually
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using you know their stock and their
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stock in a sense is its own form of
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money and the higher the value of stock
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so let me ask this we'll see if your XYZ
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if they want to if ABC wants to buy the
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XYZ company down here does it become
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harder or easier to buy it as the value
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of their own stock goes up ABC stock so
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ABC stock is going up and up does that
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make it easier or harder to buy this
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hope you're saying well that makes it
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easier to buy it because as
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price goes up ABC is becoming more
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valuable so if they want to go and buy
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this it's much easier to buy XYZ with
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let's just call it $45 bills in your
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pocket rather than $20 bills in your
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pocket
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whereas let's say XYZ goes even higher
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and all of a sudden they're sitting at
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$75 per share and they want to buy XYZ
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with some shares well now it becomes
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that much easier because instead of $45
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$20 bills they have a $75 bill that they
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can just start handing out to acquire
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this company so that is one way where
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you know the outside where yeah the
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company's not necessarily making any
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more money because they've already sold
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their shares if their value is going up
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then they can always issue new shares
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they can use shares that they still have
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because remember a company doesn't give
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away a hundred percent of itself they
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still have shares allotted and that is
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where it can come to buy a company so
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that is just one bit of flexibility and
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other flexibility points I mean they can
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go out there and you know if they ever
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need to potentially raise more money
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they can get more money with that but
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there's different avenues that go with
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it but the easiest example to kind of
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really show is just in the whole
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acquisition of things if a company wants
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to go out there acquire another company
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purchase another company then that makes
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it a whole lot easier a very famous one
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that you know is when Google went and
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bought YouTube believe it or not YouTube
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used to be their own separate thing and
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I don't know the details on it maybe if
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you want to look it up and let me know
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in the comments section
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but when Google went to buy YouTube the
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founders of YouTube I think they got
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some cat maybe it was all cash I don't
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know this could be a bad example but in
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some situations they will go and those
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that go --gel could have set the YouTube
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you know we're gonna give you X amount
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of shares and then YouTube thinkin
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alright that sounds good to me because
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your company is valuable in fact your
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company keeps getting more and more
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valuable so if you give me shares then I
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think I'll make even more money as your
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shares continue to go up so there is a
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way where within the market shares can
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act as a currency in and of itself where
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there's actually no physical cash that
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exchanges hands but that's why it really
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doesn't matter that's why companies care
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about their stock price even after
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they've sold stuff that is where
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they were very focused on returning
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value to things because they understand
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the higher they can get their share
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price the more and more valuable their
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company becomes and at the end of the
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day yeah you know it's an economy but
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then you go start to get involved a I
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want my company be the most available
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hey I want my company to get the most
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valuable and then people are competing
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on value which again is dictated by the
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share price so yeah there's a lot of
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stuff that goes on afterwards and maybe
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the company is not well we didn't raise
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any money because now just Bob and Harry
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are trading shares back and forth and
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Sally but at the end of the day they're
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keeping eying the the value of their
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stock because that's going to dictate
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just how flexible they can be in
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developing other areas of their business
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if you are out there trading alone
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currently and maybe are in the market
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looking for a community to join to
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assist you in your trading or to just
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help you you don't give you another set
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of eyeballs then I do have a private
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trading community where you can trade
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alongside me and other experienced
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traders so what you see popping up on
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the screen right now is both an
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information link so if you click on the
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inner circle one that is going to take
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you to the page where I explain all the
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details of what exactly come with the
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community both the chatroom and the
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newsletter and then the other image that
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is popped up is a behind-the-scenes tour
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where you can see exactly what is going
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to you know be contained within the
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community I take you through like I said
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a behind-the-scenes tour of everything
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and that way you'll know precisely what
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you are getting you know when you join
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so definitely check that stuff out if
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you are interested and thinking about
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you don't want it to join a community
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and let me know if you have any
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questions
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