Let’s suppose there are 500shares trading at $10. The market capitalization is 5000$.
One person now trades one share for 9$. There are still 500 shares around (if the company didn’t do a buyback) and now the market capitalization is 4500$. Where did the $500 go? Nowhere. The market cap just represents the perceived value of the company
There are not $1.5T worth of cash sitting around. What happened was a bunch of people tried selling their stock for $10, and when nobody would buy it for that, they sold it for $9. And when nobody would buy for that, they sold for $8. The market cap just dropped by 20%, but only $17 was made, not the $1000 the market cap “lost”.
I don’t think it’s entirely true:
Let’s suppose there are 500shares trading at $10. The market capitalization is 5000$.
One person now trades one share for 9$. There are still 500 shares around (if the company didn’t do a buyback) and now the market capitalization is 4500$. Where did the $500 go? Nowhere. The market cap just represents the perceived value of the company
This is the correct take.
There are not $1.5T worth of cash sitting around. What happened was a bunch of people tried selling their stock for $10, and when nobody would buy it for that, they sold it for $9. And when nobody would buy for that, they sold for $8. The market cap just dropped by 20%, but only $17 was made, not the $1000 the market cap “lost”.
I consider myself schooled.
Also, $17 was made, but $17 was lost by the buyer. It doesn’t generate money. It’s all speculation.