investors, like the angel investors and the venture capital firms. A venture capital firm may have a 40%

ownership in the firm. When the firm sells stock, the venture capital firm sells its part ownership of the firm to

the public. A second reason for the importance of the IPO is that it provides the established company with

financial capital for substantially expanding its operations.

However, most of the time when one buys and sells corporate stock the firm receives no financial return at all.

If you buy General Motors stock, you almost certainly buy it from the current share owner, and General Motors

does not receive any of your money. This pattern should not seem particularly odd. After all, if you buy a house,

the current owner receives your money, not the original house builder. Similarly, when you buy stock shares,

you are buying a small slice of the firm's ownership from the existing owner—and the firm that originally
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