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The direct I can understand, I want to sell a portion of my business on the bote that I will give that direct portion profit to the holder. How would any of th

The direct I can understand, I want to sell a portion of my business on the bote that I will give that direct portion profit to the holder. How would any of the other trading help my business, or anyone else?

liotier 9y ago
Liquidity is correlated to trading volumes - so the more people exchange shares of your company, the quicker you can find a counterpart. Investors accept lower returns if they can get their money back whenever they please, so a liquid investment vehicle is advantaged. Ceteris paribus, volatility is negatively correlated to trading volumes: if your shares are only exchanged twice a week (actual trading volumes for a small company on some exotic exchange) the price variations will inevitably happen in large steps, which does not reassure investors. And if the company is not publicly traded, who knows what the price of the next transaction will be ? A lively market for an investment vehicle opens the possibility of derivatives, which are valuable to investors interested in the company but whose appetite for risk is limited. So if your company's shares trade has derivatives, it makes them more attractive.
sokoloff 9y ago
Same reason that a $100 bill is worth more than a $100 gift card to a specific store. The presence of the secondary market makes the initial offering (sales) of shares easier. Imagine company A is making a primary offering (direct sales of shares from the company to an investor), but that those shares do not have a ready secondary market. Imagine company B is making the same primary offering, but there is a deeply liquid secondary market. Company A and Company B are otherwise identical (line of business, revenue, profit, outlook for the future, etc). Investors will much more readily invest in company B.
eru 9y ago
The possibility of that trading induces your first buyer to give you a higher price as the first seller. (Similar to how money or even bitcoin is only useful if you can pass it on.)

liotier 9y ago

Liquidity is correlated to trading volumes - so the more people exchange shares of your company, the quicker you can find a counterpart. Investors accept lower returns if they can get their money back whenever they please, so a liquid investment vehicle is advantaged. Ceteris paribus, volatility is negatively correlated to trading volumes: if your shares are only exchanged twice a week (actual trading volumes for a small company on some exotic exchange) the price variations will inevitably happen in large steps, which does not reassure investors. And if the company is not publicly traded, who knows what the price of the next transaction will be ? A lively market for an investment vehicle opens the possibility of derivatives, which are valuable to investors interested in the company but whose appetite for risk is limited. So if your company's shares trade has derivatives, it makes them more attractive.

sokoloff 9y ago

Same reason that a $100 bill is worth more than a $100 gift card to a specific store. The presence of the secondary market makes the initial offering (sales) of shares easier. Imagine company A is making a primary offering (direct sales of shares from the company to an investor), but that those shares do not have a ready secondary market. Imagine company B is making the same primary offering, but there is a deeply liquid secondary market. Company A and Company B are otherwise identical (line of business, revenue, profit, outlook for the future, etc). Investors will much more readily invest in company B.

eru 9y ago

The possibility of that trading induces your first buyer to give you a higher price as the first seller. (Similar to how money or even bitcoin is only useful if you can pass it on.)