What purpose does the stock market serve?

[ksen]

I get that companies use the stock markets to raise equity. But after a company raises funds through their IPO what is the purpose of the stock market? From what I can tell it's just another place to gamble money.

Has the stock market become more of a hindrance to our economic well being than a benefit especially considering the rise of "maximizing shareholder value"?

 

[Jimmy Higgins]

I don't understand why a stock market needs to be open five days a week.

 

[Togo]

Technically speaking, it's an exchange whereby three things are achieved:

1) People can easily buy and sell stock, should they wish to
2) People can easily see what a stock, and thus a company, is worth to it's shareholders
3) The volatility of the stock goes down. Because price corrections and buyers and sellers can be dealt with quickly, the stock moves more gradually than it otherwise would.

That's the theory, anyway.

 

[Keith&Co.]

2) People can easily what a stock, and thus a company, is worth to it's shareholders

2 needs a verb...?

 

[Togo]

edited.

 

[NobleSavage]

It's only gambling if you try and beat the market. It allows people with limited means to become "capitalists".

 

[Jimmy Higgins]

2) People can easily what a stock, and thus a company, is worth to it's shareholders

2 needs a verb...?

Assess, judge, or tell. The term "easily" is also incorrect.

 

[dismal]

I get that companies use the stock markets to raise equity. But after a company raises funds through their IPO what is the purpose of the stock market? From what I can tell it's just another place to gamble money.

Has the stock market become more of a hindrance to our economic well being than a benefit especially considering the rise of "maximizing shareholder value"?

a) there are follow-on equity offerings when capital is needed
b) if there were no liquid stock market in which to sell people would be reluctant to buy in the IPO

 

[ksen]

It's only gambling if you try and beat the market. It allows people with limited means to become "capitalists".

How does that happen? I mean McDonald's put out a budget for their limited means workers that didn't include buying food nevermind investing for retirement.

 

[ksen]

I get that companies use the stock markets to raise equity. But after a company raises funds through their IPO what is the purpose of the stock market? From what I can tell it's just another place to gamble money.

Has the stock market become more of a hindrance to our economic well being than a benefit especially considering the rise of "maximizing shareholder value"?

a) there are follow-on equity offerings when capital is needed

You mean if the company sells more stock on the market?

b) if there were no liquid stock market in which to sell people would be reluctant to buy in the IPO

Sure.

I'm not advocating the destruction of the stock market. I guess I'm just questioning the pivotal role it plays in all of our lives. Is that really necessary? Is it actually helpful to our society to have so many decisions decided based upon how the stock market will react?

 

[AthenaAwakened]

The same purpose as Circus Circus, only without trapeze acts, amusement rides and RV Park.

 

[NobleSavage]

It's only gambling if you try and beat the market. It allows people with limited means to become "capitalists".

How does that happen? I mean McDonald's put out a budget for their limited means workers that didn't include buying food nevermind investing for retirement.

Limited means doesn't mean bottom of the barrel. I've seen plenty of McDonalds workers with tattoos. That could have bought some stock. Fast food might be humiliating, but in a decent market if you show up and are competent they will make you shift manager rather quickly.

 

[dismal]

a) there are follow-on equity offerings when capital is needed

You mean if the company sells more stock on the market?

b) if there were no liquid stock market in which to sell people would be reluctant to buy in the IPO

Sure.

I'm not advocating the destruction of the stock market. I guess I'm just questioning the pivotal role it plays in all of our lives. Is that really necessary? Is it actually helpful to our society to have so many decisions decided based upon how the stock market will react?

IPO = Initial Public Offering. There can be and often are other secondary offerings.

I'm sorry if it plays a pivotal role in your life but that's a personal choice.

 

[Bronzeage]

a) there are follow-on equity offerings when capital is needed

You mean if the company sells more stock on the market?

b) if there were no liquid stock market in which to sell people would be reluctant to buy in the IPO

Sure.

I'm not advocating the destruction of the stock market. I guess I'm just questioning the pivotal role it plays in all of our lives. Is that really necessary? Is it actually helpful to our society to have so many decisions decided based upon how the stock market will react?

The stock market allows the efficient collection of large blocks of capital, which allow corporations to engage in very large enterprises. No one has ever built a railroad, steamship line, or industrial manufacturing company, with inherited feudal lands. You can thank the stock market for your car and your iphone.

 

[Nice Squirrel]

KSEN
​

 

[ksen]

You mean if the company sells more stock on the market?

b) if there were no liquid stock market in which to sell people would be reluctant to buy in the IPO

Sure.

I'm not advocating the destruction of the stock market. I guess I'm just questioning the pivotal role it plays in all of our lives. Is that really necessary? Is it actually helpful to our society to have so many decisions decided based upon how the stock market will react?

IPO = Initial Public Offering. There can be and often are other secondary offerings.

I'm sorry if it plays a pivotal role in your life but that's a personal choice.

I'm just suggesting that our societal focus on the stock market may not necessarily be a good thing for society. Policies that are good for the stock market aren't necessarily good for society. For example when good employment numbers come out instead of being greeted with fanfare and joy we are instead treated with stories about how those numbers will negatively effect the stock market.

But I think that's just a symptom of capital owners being the focus of our attention instead of wage earners.

 

[Togo]

It's a discussion that's come up a few times over at my workplace(s). The stockmarkets have an upsides, particularly for the participants, in terms of access to capital. It is simply cheaper for a listed company to raise funds than an unlisted company, although that's partly because of all the regulations present in the market. It also has a downside, in terms of increased exposure to speculation.

Think of it as putting yourself up on 'hot or not?' Yes, you're more likely to get a date, but there are downsides as well, and your date is unlikely to be interested in your future as a person.

 

[NobleSavage]

Think of it as a distributed method of valuing on going concerns. Yeah, it's has it's faults, but we also have a hierarchical system known as GAPP, which also has it's own problems.

 

[dismal]

You mean if the company sells more stock on the market?

b) if there were no liquid stock market in which to sell people would be reluctant to buy in the IPO

Sure.

I'm not advocating the destruction of the stock market. I guess I'm just questioning the pivotal role it plays in all of our lives. Is that really necessary? Is it actually helpful to our society to have so many decisions decided based upon how the stock market will react?

IPO = Initial Public Offering. There can be and often are other secondary offerings.

I'm sorry if it plays a pivotal role in your life but that's a personal choice.

I'm just suggesting that our societal focus on the stock market may not necessarily be a good thing for society. Policies that are good for the stock market aren't necessarily good for society. For example when good employment numbers come out instead of being greeted with fanfare and joy we are instead treated with stories about how those numbers will negatively effect the stock market.

But I think that's just a symptom of capital owners being the focus of our attention instead of wage earners.

I reject your assertion it plays a pivotal role in all our lives. It plays a fairly minor role in mine and I'm in finance, so I probably have more interaction with it than most.

 

[ksen]

I reject your rejection.