Reply #7: The fact that they exist in the first place might be the best place to look [View All]

[David Ricardo]

Company X generates a certain amount of profit per year.

I see a better way to run the company more profitably, or even one that might be worth to me liquidated than running, so I buy enough shares to hold a majority stake in the company. Presumably the existing shareholders have asked for a price acceptable to them, so they are better off. I now hold a company that I think I can run either more profitably or liquidate, either way I am getting a return acceptable to me, so I am better off.

The fact that both parties are better off, in my mind, justifies the existence of such markets.

To further discuss, however, you have to look into some of the dynamics of corporate governance such as principal-agent inefficiencies and stock price speculation (a stock is as much as a commodity really as an orange), etc. etc.

But the percentage of ownership in the company, represented through stock, is the good or service being sold, so I cannot agree with your first sentence.