How do companies get their money from being on the stock market?
I understand the reason a company will list is to raise capital.
Who gives them this money? The stock market is between buyers and sellers themselves right ? So how do companies get their capital?
Being listed publicly doesn't get a company any money. Getting the listing is what does it: the company sells new shares in an Initial Public Offering (IPO), the underwriter takes its cut of the proceeds, and whatever is left goes to the company. The shares are then traded, as you say, among buyers and sellers who hope to profit off of changes in the perceived value of the shares. That's sometimes known as the "secondary market"; that name emphasizes that this trading does not involve the initial sale of the shares.
The common approach to an IPO is for the company to hire an investment banker (IB) who will underwrite the shares (sell the stock to the public). There may be an associated underwriting syndicate.
The IB analyzes the company to determine its value, prepares a prospectus and distributes it to clients. Some IBs do a road show, promoting the company and attempting to sell large blocks of shares to fund managers and financial institutions. Some shares go to retail clients but that tends to be a smaller percentage.
Near the day of the IPO, share price is set. The company receives the cash, less the mark up, which last I knew was a maximum of 5%. How it's divided depends on whether it was a firm commitment or best efforts agreement.
Once public trading begins, transactions are between buyers and sellers.
The simple answer is: Before "going public", 100% of the company is owned by the company itself and usually some private shareholders (investors). When the company goes public, some of the shares that were owned by the company are sold in the IPO (Initial Public Offering), and become the first publicly traded shares of the now public company.
So your assumption that money changes hands between buyers and sellers is correct, and in this case the corporation itself is the seller and they get the money from the buyers. The price that the buyers pay for these initial shares is determined the old fashioned way.. through negotiation between the corporation, the underwriter, and the investors who are interested in buying the stock. They'll look at the financial statistics of the company and how well it has done so far, and how well they think the company will do going forward.. and settle on a price at which all the shares to be sold in the IPO have a buyer.
Once the IPO is complete, public trading is open and the initial buyers are free to trade the stock between themselves or with others.
From then on, the price is determined by supply and demand, the company no longer has any say in the price of their stock. It's not uncommon for a company to buy back its own stock if the market value of the company is lower than the company feels it should be.. thus effectively investing in their own future.. and they can also sell their own stock if they want to raise additional cash.
Keep in mind that companies do not usually sell all their shares in the IPO therefore they can sell more of themselves to the public if they need cash. That's one reason that companies continue to care about their share price after they've gone public.
