Quora Answer: If I Bought Shares in a Company, Does Money Go to the Company?

The following is my answer to a Quora question: “If I bought shares in a company, does money go to the company?”

If you bought the shares directly from the company, at share issue, much of the money goes directly to the company.  This is especially so for an initial public offering.  The intent is to raise funds.  If you bought it from someone other than the company, direct from the shareholder in a private sale, or through the stock exchange, the money goes to the buyer.

If there is demand for the stock, the stock value rises, and the capitalisation of the company increases.  This increases leverage, meaning the amount the company can borrow in terms of trade financing, or loans; or the amount of credit the company has with financial institutions.  The company may also sell that stock to raise further cash if that is an option.