What happens when you sell stock?

[Ghost]

So I'm a finance major in college and none of my classes have yet told me what exactly happens when you sell stock. For example, businesses are worried about their debt because if they can't pay off the interest they can go into bankruptcy. Why isn't it the same for stock? Is it because the only money a company gets is from its IPO and stock offerings after that? For example, they receive the money from the IPO, but when the price fluctuates in the secondary markets afterwards, the company doesn't receive any of that money, if the stock price rises? And when the shares are sold, they aren't sold back to the company but in the secondary market to other investors? Since I assume that's the case, how can shares be sold so quickly? How can the cofounder of facebook sell 6 million shares whenever he wants? Who purchases it? If I had 6 million shares of facebook on etrade could I sell it all at once, obviously theoretically speaking? I guess I just don't understand how stocks can be bought and sold so quickly, as wouldn't you have to wait for someone to want/ask for it? Thanks in advance.

[don_sv_az]

Banks, mutual funds and investment companies have hundreds of millions of dollars that they need to keep invested. They sell stocks that they believe are overvalued and buy stocks they think are under or fairly valued. Most of them are required by their bylaws to keep a certain percentage of their capital invested (like 90-95%) They keep the market moving, even with a 6 million share trade, although that might be spread over 5-15 different investment companies.

[pegasusaig]

All stocks aren't bought or sold quickly, but most are. The primary exchange stocks are large, usually many millions of shares. The sheer volume of trading in them means there are always buy/sell offers. Some those are "Market Makers", firms that stand ready to buy or sell particular stocks at any time. While larger stocks will trade 100,000 or even millions of shares per day, there are small ones that on some days have no trades at all. That's why most trading investors look at average volume and avoid stocks which have little activity.

A stock sells when someone else buys, it simply trades hands. The brokerage does not sell the stock, it manages the transactions and the accounting. On the brokerage screen you see for a given stock, you see "Bid" and "Ask" by the pricing. These are the prices the current best buy offer is at (bid) and the current lowest sell offer is at. Beside these you will see another number, for example "$20.50/85" . That means the offer is at $20.50 and the volume of shares available at that price is 8500. If you have a higher level of broker service you can see buy/sell offers and details farther from the current price.

Companies only receive money from a stock when it is initially sold. They are the owner then. When traded between investors, the money changes hands between investors.

Last- when company's sell stock they are raising money, not borrowing it. They are selling partial ownership in the company, and there is no guarantee that is will be worth anything.