How Do Stocks Work? Here’s What You Need To Know

A stock represents a means for companies to raise capital outside of a regular revenue stream. 

Companies start as privately held and are not listed on any stock exchange. Its leaders must decide to start selling shares to the general public through an initial public offering (IPO). 

Companies choose how many individual stocks they want to make available during the IPO process and each stock's initial price. Also known as “going public,” the process typically takes about six months. 

Upon completing this initial offering, publicly traded companies list on the stock market. Once listed on a stock exchange, a company's stock price can fluctuate depending on several particular elements.

In a sense, shares of stock are priced based on supply and demand. Companies have a finite number of shares, and any investor wanting to buy stock has to decide if the price justifies a purchase. 

When a stock is in the limelight, prices rise, and investors want a piece of the pie. Conversely, a lack of demand leads to too many people selling stocks and no one willing to buy. 


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