Stock markets are places where companies can offer their shares for sale. They do this through an initial public offer or IPO. If a company sells Rs 10 lakh of its shares at Rs 10 each, then it is able to raise Rs 1 crore for itself.
Companies raise money for a variety of reasons. Mostly, it is to expand its business or to pay down debt.
Potential investors who look at a company's IPO will ask the same two questions outlined above. What is the company's earnings potential, and whether there are other investments which might give them a better return. If they decide that the company's earnings potential is good, and can offer a better rate of return, they will invest in it.
That is why many companies who offer IPOs usually price their stocks at attractive levels.
After the IPO, the thousands or millions of investors who have bought the stocks can go back to the stock market and sell the stocks to other investors, so 'trading' of the stocks begin. A stock market is simply the clearing house for these 'trades'.
Companies raise money for a variety of reasons. Mostly, it is to expand its business or to pay down debt.
Potential investors who look at a company's IPO will ask the same two questions outlined above. What is the company's earnings potential, and whether there are other investments which might give them a better return. If they decide that the company's earnings potential is good, and can offer a better rate of return, they will invest in it.
That is why many companies who offer IPOs usually price their stocks at attractive levels.
After the IPO, the thousands or millions of investors who have bought the stocks can go back to the stock market and sell the stocks to other investors, so 'trading' of the stocks begin. A stock market is simply the clearing house for these 'trades'.
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