I realize there is a Stock Market thread, but that is more of a "What stocks should I trade?" thread and I am looking more for the origin of stocks here, so I will pose this very basic question: Where do stocks come from?

Here is my understanding, feel free to tweak it or outright crush it. Let's say I start a company, "Jim's Lawn Mowing Service". My company grows and grows such that it eventually get's so big that I decide to make it a corporation, so I need to create stocks, and shift the balance of power from myself to the share holders. Do I simply say, OK I have 10,000 shares of stock I am selling for $0.05 a share, then pocket the $500 as the CEO? (I understand that the CEO can be anyone and is elected off a vote of the shareholders, but for argument's sake I am going to assume the first CEO is normally the person who started the company).

And then at that point, the 10,000 shares of stock fluctuate only on speculation of how my lawn mowing business will do based on a variety of factors?

I have lots of follow up questions, but this is just kind of a feeler. Thanks for any help, and if possible, please try to keep any replies in simple layman's terms.

10/22/2010 1:11:40 PM

http://en.wikipedia.org/wiki/Stock

10/22/2010 1:24:02 PM

Yeah I have read that, and other sites.

10/22/2010 1:32:21 PM

Quote :

"The money paid by investors for the newly-issued shares goes directly to the company (in contrast to a later trade of shares on the exchange, where the money passes between investors). An IPO, therefore, allows a company to tap a wide pool of stock market investors to provide it with large volumes of capital for future growth. The company is never required to repay the capital, but instead the new shareholders have a right to future profits distributed by the company and the right to a capital distribution in case of a dissolution. The existing shareholders will see their shareholdings diluted as a proportion of the company's shares. However, they hope that the capital investment will make their shareholdings more valuable in absolute terms. In addition, once a company is listed, it will be able to issue further shares via a rights issue, thereby again providing itself with capital for expansion without incurring any debt. This regular ability to raise large amounts of capital from the general market, rather than having to seek and negotiate with individual investors, is a key incentive for many companies seeking to list."

http://en.wikipedia.org/wiki/IPO

So, yes, the owner gets to pocket the $500 but then he has to share future profits with shareholders. The value of the stock will fluctuate on speculation but also on hard data since a publicly traded company is required to disclose financial details that are not required by private companies.

Quote :

"Disadvantages Privately held companies have several advantages over publicly traded companies. A privately held company has no requirement to publicly disclose much, if any financial information; such information could be useful to competitors. For example, publicly traded companies in the United States are required by the SEC to submit an annual Form 10-K containing a comprehensive detail of a company's performance. Privately held companies do not file form 10-Ks; they leak less information to competitors, and they tend to be under less pressure to meet quarterly projections for sales and profits. Publicly traded companies are also required to spend more for certified public accountants and other bureaucratic paperwork required of all publicly traded companies under government regulations. For example, the Sarbanes-Oxley Act in the United States does not apply to privately held companies. The money and income of the owners remains relatively unknown by the public."

http://en.wikipedia.org/wiki/Public_company

10/22/2010 2:16:54 PM

Don't expect too much free advice

10/22/2010 4:45:47 PM

10/23/2010 1:25:16 AM

^fuckin' URLs, how do they work?

10/23/2010 10:00:58 PM

^ban^^ban study hall is serious

10/24/2010 12:23:09 AM