How do stocks work?

If person A has 10 shares and person B buys 20 shares, doesn't person A now control a smaller percentage of shareholder's equity?

8 Answers

Relevance
  • 1 month ago

    "How does Stock work"

     And this is how stock works,  like my investment of $1000 with Annie Fox 2 weeks back went well and I made $13,700 off it. isn't that amazing?

    Below is her link

    • Rowland1 month agoReport

      annie_fox@hotmail.com 

    • Commenter avatarLog in to reply to the answers
  • 1 month ago

    At any time a company has so many shares in existence (x).  Person A owns 10/X of the company, person B owns 20/X of the company.  Their percentages are based on the number of shares they have, and the number of shares in existence.  

    • Commenter avatarLog in to reply to the answers
  • GA41
    Lv 7
    1 month ago

    A company will make a stock offering to sell shares on the market.  If the company issues 100 shares, people in the market buy the shares.  If A bought 10 shares  other people bought 90 shares so there are 100 shares still on the market.  A owns 10% of the company.  If B buys 20 shares on the market, he must buy them from the 90 shares.  A owns 10, B owns 20 and others own 70 shares.  Because there are only 100 shares outstanding, A still owns 10%.

    Dilution of shares only occurs if the company issues more stock.  If the company decides to issue another 100 shares, now there are 200 shares on the market and A only owns 5% of the shares instead of 10%.  This may cause the values of his share to diminish, because the earnings per share will be cut in half.  If the company is valued at the same P/E ratio, the value of his share will drop with the earnings.

    • Commenter avatarLog in to reply to the answers
  • kswck2
    Lv 7
    1 month ago

    If A buys 10 Shares and B buys 20 shares, B buys them from someone else. So A still has 10 shares. 

    • Commenter avatarLog in to reply to the answers
  • What do you think of the answers? You can sign in to give your opinion on the answer.
  • Judy
    Lv 7
    1 month ago

    No, someone else owned those other 20 shares before B bought them.    

    • Commenter avatarLog in to reply to the answers
  • 1 month ago

    If there are 40 shares and person A has 10 and person C has 30 and then person B buys 20 from person C (so C has 10), then A still has the same percentage (25%).

    If person B buys 20 from the corporation, then yes, A does a smaller percentage, but the corporation has the money that person B paid for the shares, so now the equity is worth more money, so A may have gained.

    • Commenter avatarLog in to reply to the answers
  • Anonymous
    1 month ago

    Not usually. That only happens if, one, person A's shares don't have a dilution guarantee from the corporation and, two, person B buys the 20 shares directly from the company as part of a subsequent issuance of stock. Both of those things have to happen for person A's proportion of ownership to go down.

    • Commenter avatarLog in to reply to the answers
  • Anonymous
    1 month ago

    No minor shareholder controls shareholders equity.

    All things being equal person b owns twice the economic interest. Gets twice the dividends, if any.

    Shareholders' equity represents the net worth of a company, which is the dollar amount that would be returned to shareholders if a company's total assets were liquidated, and all of its debts were repaid. Typically listed on a company's balance sheet, this financial metric is commonly used by analysts to determine a company's overall fiscal health. Shareholders' equity is also used to determine the value of ratios, such as the debt-to-equity ratio (D/E), return on equity (ROE), and the book value of equity per share (BVPS).

    Not to be confused with Market Value.

    • Commenter avatarLog in to reply to the answers
Still have questions? Get answers by asking now.