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If the par value of the common stock is 5 dollars and is sold at market for 10 dollars does the company get the extra $5? Also how is the company affected by the market value going up and down?

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1 Answer 1

If existing shares are sold, then the transaction does not involve the company -it is between the old shareholder and the new shareholder. The only thing that the company gets, is a new shareholder.

If on the other hand this is issuance of new stock, then the new shareholder gets the paper and the company the green paper -the whole of it.

Your second question ("how the company is affected...") is too broad and unclear to be easy to answer. Is this in the short-run? Long-run? In relation to its operations? In relation to its competitive position? As regards its credit rating?

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I think you're being a tad harsh here Alecos. The nuts and bolts of how the financial system operates are a necessary part of understanding how the economy works. –  Lumi Dec 14 at 12:54
    
@Lumi The question has nothing really to do with how the financial system works: it comes from fundamental property rights, of which all people have an intuitive understanding: the shares of a company is the property of the shareholders, not of the company itself, does it take economic training or professional experience to realize that? So if you sell something, wouldn't it sound absurd that somebody else gets the proceeds? As for your suggested edit in my answer, I will leave others to decide, and if they approve it, I won't object. Thanks for taking an interest here, this is good. –  Alecos Papadopoulos Dec 14 at 13:28
    
Alecos, it would seem that it wasn´t intuitively obvious to at least one person that shares can be issued by a company, or sold between 2 parties on a market. It´s easy as experts to forget the utter confusion attendant on being a beginner in any field. –  Lumi Dec 14 at 14:10
    
@Lumi. Indeed. And the main issue is again: there are millions of such trivial questions, that can also be answered by a million web resources. How much of them are we able, and are willing, to handle? I was the one that answered this trivial question, but I don't want to see my time here spent on the likes of it progressively more and more. That's why I tried to make something out of it for the benefit of the site: answer the triviality, issue a warning, but also attempt to bring in the surface something (the second question), that can have some substance here. I wait for the OP to respond. –  Alecos Papadopoulos Dec 14 at 14:19
    
Alecos, if the programming stack overflow had taken that attitude, there wouldn´t be an economics stack overflow. The approach is simple, get one good answer to a trivial question, and then bookmark that for all future similar questions. –  Lumi Dec 14 at 14:25

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