When a stock price goes down, does the money just disappears into thin air?
Yes and no. There is no actual money involved - just assumed value. Imagine you own a picture that you painted yourself, and all your friends agree it is worth 1000 $. You feel like you have a 1000 $-picture. Now a guy with some more knowledge visits you, and tells you that it is really only worth about a 100 $. Did you just lose 900 $? If yes, where did the money go? At any given time there are buy orders and there are sell orders.  Typically there is a little bit of space between the lowest sell order and the highest buy order, this is known as the bid/ask spread.  As an example say person A will sell for $10.10 but person B will only buy at $10.00.  If you have a billion shares outstanding just the space between the bid and ask prices represents $100,000,000 of market cap. Now imagine that the CEO is in the news related to some embezzlement investigation.  A number of buyers cancel their orders.  Now the highest buy order is $7.  There isn't money involved, that's just the highest offer to buy at the time; but that's a drop from $10 to $7.  That's a change in market cap of $3,000,000,000.  Some seller thinks the stock will continue to fall, and some buyer thinks the stock has reached a fair enterprise value at $7 billion ($7 per share).  Whether or not the seller lost money depends on where the seller bought the stock.  Maybe they bought when it was an IPO for $1.  Even at $7 they made $6 per share. Value is changing, not money.  Though it would be fun, there's no money bonfire at the NYSE. Cash changes hands when you buy or sell the stock. While you own the stock, you own it, not cash, so there is no cash to go anywhere. You spent your money when you bought. The seller got that money. It's gone. You hope that when you sell the stock, someone will give you more money for it than you spent. But they may give you less. Money doesn't magically appear either way, it comes from the buyer. After selling, you have the money -- however much you sold for -- and no longer have the stock. NOTE that this means the current value of a share of stock is interesting, but not really very relevant, unless you are actively buying or selling. What your portfolio is worth on paper is nothing more than an approximate snapshot at the moment you retrieve the data. It is not a promise of what will actually happen when you do sell. You buy a $100k sport car, but don't buy any insurance. You take a curve too fast and jump out just in time to see your car go off a cliff, like a chase movie. The value went from $100k to zero in seconds. Where did the $100k go? In short, thanks to the answers and comments posted so far.  No actual money is magically disappeared when the stock price goes down but the value is lost. The value changes of a stock is similar to the value changes of a house. The following is the long answer I came up with based on the previous answers and comments alone with my own understandings. Any experts who find any of the following is 200% out of place and wrong, feel free to edit it or make comments. Everything below only applies if the following are true: The stock price is only decreasing since the IPO because the company has been spending the money but not making profits after the IPO. The devaluation of the stock is not the result of any bad news related to the company but a direct translation of the money the company has lost by spending on whatever the company is doing. The actual money don’t just disappear into the thin air when the stock price goes down. All the money involved in trading this stock has already distributed to the sellers of this stock before the price went down.  There is no actual money that is literally disappeared, it was shifted from one hand to another, but again this already happened before the price went down.   For example, I bought some stocks for $100, then the price went down to $80. The $100 has already shifted from my hand to the seller before the price went down. I got the stock with less value, but the actual money $100 did not just go down to $80, it’s in the hand of the seller who sold the stock to me.  Now if I sell the stock to the same seller who sold the stock to me, then I lost $20, where did the $20 go? it went to the seller who sold the stock to me and then bought it back at a lower price. The seller ended up with the same amount of the stocks and the $20 from me. Did the seller made $20? Yes, but did the seller’s total assets increased? No, it’s still $100, $80 from the stocks, and $20 in cash. Did anyone made an extra $20? No. Although I did lost $20, but the total cash involved is still there, I have the $80 , the seller who sold the stock to me and then bought it back has the $20. The total cash value is still $100. Directly, I did lost $20 to the guy who sold me the stock when the stock has higher value and then bought it back at a lower price. But that guy did not increased his total assets by $20. The value of the stock is decreased, the total money $100 did not disappear, it ended up from one person holding it to 2 people holding it. I lost $20 and nobody gained $20, how is that possible? Assume the company of the stock never made any profit since it’s IPO, the company just keeps spending the money, to really track down where the $20 I lost is going, it is the company has indirectly spent that money. So who got that $20 I lost? It could be the company spent $20 for a birthday cake, the $20 went to the cake maker. The company never did anything to make that $20 back, so that $20 is lost. Again, assume the stock price only goes down after  its IPO, then buying this stock is similar to the buying a sport car example from JoeTaxpayer (in one of the answers), and buying an apple example from BrenBarn(in one of the comments from JoeTaxpayer’s answer).  Go back to the question, does the money disappears into the thin air when the value of the stock goes down? No, the money did not disappear, it switched hands. It went from the buyer of the stock to the company, and the company has spent that money. Then what happens when the stock price goes down because bad news about the company? I believe the actual money still did not just disappear. If the bad news turn out to be true that the company had indeed lost this much money, the money did not disappear, it’s been spent/lost by the company. If the bad news turn out to be false, the stock price will eventually go up again, the money is still in the hand of the company. As a summary, the money itself did not disappear no matter what happens, it just went from one wallet to another wallet in many different ways through the things people created that has a value. Price and value are two different things. Price is determined by supply and demand. Value does affect the demand. People are willing to pay more if they value the item more but value is not price.
"Of course, but that's not relevant to my example. Let me clarify: say you hold a highly-appreciated $10M position in AAPL and you have good reason to believe the next iPhone is going to be a flop, causing the stock to decline 20%. You can sell now to avoid the (probable) decline, but by doing so you will be left with, let's say, $6.67M after paying $3.33M of state and federal LTCG taxes on the appreciation ($9M of the $10M, because you bought a long time ago).  However, by simply doing nothing and ""eating"" the 20% decline, you'll end up with $8M instead of $6.67M.  Many economists would criticize the tax in this example, as it has led to the investor rationally suffering a $2M loss, instead of reallocating all $10M of his/her capital to a more promising enterprise. Furthermore, if/when many investors act that way, they can create inefficiency in the equity markets (prices not declining by as much as they should to reflect a firm's reduced prospects)." When you buy a stock, you become a partial owner of the company that the stock is for. As the company is valued at a higher or lower amount, the stock will reflect that by gaining or losing value. You still own that stock. For example, if you bought a stock for $10 per share and next week it is worth $8 dollars per share, the only loss incurred is on paper. You do not have to pay the difference (which I think is what you are asking?) and will only physically lose that money if you sell at that point. Similarly if that stock becomes worth $12, you have only gained money on paper and can only physically see it if you sell at that point. "I think that ""memoryless"" in this context of a given stock's performance is not a term of art. IMO, it's an anecdotal concept or cliche used to make a point about holding a stock. Sometimes people get stuck... they buy a stock or fund at 50, it goes down to 30, then hold onto it so they can ""get back to even"". By holding the loser stock for emotional reasons, the person potentially misses out on gains elsewhere." What financial instruments are there that are profitable when an underlying assets falls? The instrument you are looking for is called an Option, specifically a Put Option. It allows you, within the validity date, to sell ('Put') the respective shares to the option giver, at the predefined Strike Price. For example, let's assume APPL trades currently at 100 $ per share, and you think they will go down a lot. You buy one Put Option for 100 shares (they always come for larger amounts like 100s) for a Strike Price of 90 $, and pay 5 $ for it (it would be cheap if nobody believes they will fall that much). Note the last sentence under 2. - it is rather easy and very common when trading options to make complete losses. You have been warned. Are they available for IPOs? They could be available for IPOs, even before the IPO. However, someone has to put them out (some large bank, typically), which is some effort, and they would only do that if they expect enough interest and volume in the trade. most of the time, there will be no such options on the market. Are they available for foreign stocks?Yes, but again only selectively - only if the stock is well known and interesting enough for a broad audience. Only on an accounting basis. The moment they start selling, it would plunge. Take a look at all the small float tech IPOs. Big pop, but once the lockup period ends, it drops 50% as insiders sell. In the end, fundamentals will rule. Facebook managed to unload a quarter of the company at the vastly inflated $38, which is very impressive. The other tech IPOs typically sell less than 10%, because selling more would lead to very low share prices. Remember, these guys are not retail investors selling 100 shares. The ticker shows the price of the last block of shares that was traded, but when someone tries to sell a couple million shares, then it will plunge. Investment banks will put out various reports and collect revenues from that along with their banking activity.  I don't read them or care to read them myself.  If banks can make money from something, they will likely do it, especially if it is legal. To take the Tesla stock question for a moment: Aren't you ruling out that yesterday was the day that Tesla was included in the Nasdaq 100 and thus there may be some people today exiting because they tried to cash in on the index funds having to buy the stock and bid it up in a sense?  Or as @littleadv points out there could be those tracking the stocks not in the index that would have been forced to sell for another idea here. The Goldman note is a possible explanation but there could well be more factors in play here such as automated trading systems that seek to take advantage of what could be perceived as arbitrage opportunities. There can be quick judgments made on things which may or may not be true in the end.  After all, who knows exactly what is causing the sell-off.  Is it a bunch of stop orders being triggered?  Is it people actually putting in sell order manually?  Is it something else?  There are lots of questions here where I'm not sure how well one can assign responsibility here. Unless I am missing something subtle, nothing happens to the buyer. Suppose Alice wants to sell short 1000 shares of XYZ at $5.  She borrows the shares from Bob and sells them to Charlie.  Now Charlie actually owns the shares; they are in his account. If the stock later goes up to $10, Charlie is happy; he could sell the shares he now owns, and make a $5000 profit. Alice still has the $5000 she received from her short sale, and she owes 1000 shares to Bob.  So she's effectively $5000 in debt.  If Bob calls in the loan, she'll have to try to come up with another $5000 to buy 1000 shares at $10 on the open market.   If she can't, well, that's between her and Bob.  Maybe she goes bankrupt and Bob has to write off a loss.   But none of this has any effect on Charlie!  He got the shares he paid for, and nobody's going to take them away from him.  He has no reason to care where they came from, or what sort of complicated transactions brought them into Alice's possession.  She had them, and she sold them to him, and that's the end of the story as far as he's concerned. "I can see two possibilities. Either a deal is struck that someone (the company itself, or a large owner) buys out the remaining shares. This is the scenario @mbhunter is talking about, so I won't go too deeply into it, but it simply means that you get money in your bank account for the shares in question the same as if you were to sell them for that price (in turn possibly triggering tax effects, etc.). I imagine that this is by far the most common approach. The other possibility is that the stock is simply de-listed from a public stock exchange, and not re-listed elsewhere. In this case, you will still have the stock, and it will represent the same thing (a portion of the company), but you will lose out on most of the ""market"" part of ""stock market"". That is, the shares will still represent a monetary value, you will have the same right to a portion of the company's profits as you do now, etc., but you will not have the benefit of the market setting a price per share so current valuation will be harder. Should you wish to buy or sell stock, you will have to find someone yourself who is interested in striking a deal with you at a price point that you feel comfortable with." Share prices fall when dividends are paid out because the paid dividend (cash out) actually reduces the value of the company. Usually the share price falls by the amount of the dividend payment. Unless other people believe you have a reason for selling at a lower price, your sale probably has no lasting effect at all on the market. Of course, if people see you dump a few million dollars' worth of shares at a discount, they may be inclined to believe you have a reason. But if you just sell a few, they will conclude the reason is just that you needed cash in a hurry. If you buy a stock and it goes up, you can sell it and make money. But if you buy a stock and it goes down, you can lose money. "He didn't sell in the ""normal"" way that most people think of when they hear the term ""sell."" He engaged in a (perfectly legitimate) technique known as short selling, in which he borrows shares from his broker and sells them immediately. He's betting that the price of the stock will drop so he can buy them back at a lower price to return the borrowed shares back to his broker. He gets to pocket the difference. He had about $37,000 of cash in his account. Since he borrowed ~8400 shares and sold them immediately at $2/share, he got $16,800 in cash and owed his broker 8400 shares. So, his net purchasing power at the time of the short sale was $37,000 + $16,800 - 4800 shares * $2/share. As the price of the stock changes, his purchasing power will change according to this equation. He's allowed to continue to borrow these 8400 shares as long as his purchasing power remains above 0. That is, the broker requires him to have enough cash on hand to buy back all of his borrowed shares at any given moment. If his purchasing power ever goes negative, he'll be subject to a margin call: the broker will make him either deposit cash into his account or close his positions (sell long positions or buy back short positions) until it's positive again. The stock jumped up to $13.85 the next morning before the market opened (during ""before-hours"" trading). His purchasing power at that time was $37,000 + $16,800 - 8400 shares * $13.85/share = -$62,540. Since his purchasing power was negative, he was subject to a margin call. By the time he got out, he had to pay $17.50/share to buy back the 8400 shares that he borrowed, making his purchasing power -$101,600. This $101,600 was money that he borrowed from his broker to buy back the shares to fulfill his margin call. His huge loss was from borrowing shares from his broker. Note that his maximum potential loss is unlimited, since there is no limit to how much a stock can grow. Evidently, he failed to grasp the most important concept of short selling, which is that he's borrowing stock from his broker and he's obligated to give that stock back whenever his broker wants, no matter what it costs him to fulfill that obligation." You are misunderstanding what makes the price of a stock go up and down. Every time you sell a share of a stock, there is someone else that buys the stock.  So it is not accurate to say that stock prices go down when large amounts of the stock are sold, and up when large amounts of the stock are bought.  Every day, the amount of shares of a stock that are bought and sold are equal to each other, because in order to sell a share of stock, someone has to buy it. Let me try to explain what actually happens to the price of a stock when you want to sell it. Let's say that a particular stock is listed on the ticker at $100 a share currently.  All this means is that the last transaction that took place was for $100; someone sold their share to a buyer for $100. Now let's say that you have a share of the stock you'd like to sell.  You are hoping to get $100 for your share.  There are 2 other people that also have a share that they want to sell.  However, there is only 1 person that wants to buy a share of stock, and he only wants to pay $99 for a share.  If none of you wants to sell lower than $100, then no shares get sold.  But if one of you agrees to sell at $99, then the sale takes place.  The ticker value of the stock is now $99 instead of $100. Now let's say that there are 3 new people that have decided they want to buy a share of the stock.  They'd like to buy at $99, but you and the other person left with a share want to sell at $100.  Either one of the sellers will come down to $99 or one of the buyers will go up to $100.  This process will continue until everyone that wants to sell a share has sold, and everyone who wants to buy a share has bought.  In general, though, when there are more people that want to sell than buy, the price goes down, and when there are more people that want to buy than sell, the price goes up. To answer your question, if your selling of the stock had caused the price to go down, it means that you would have gotten less money for your stock than if it had not gone down.  Likewise, if your buying the stock had caused it to go up, it just means that it would have cost you more to buy the stock.  It is just as likely that you would lose money doing this, rather than gain money. Just before a crash or at the start of the crash most of the smart money would have gotten out, the remaining technical traders would be out by the time the market has dropped 10 to 15%, and some of them would be shorting their positions by now.  Most long-term buy and hold investors would stick to their guns and stay in for the long haul. Some will start to get nervous and have sleepless nights when the markets have fallen 30%+ and look to get out as well. Others stay in until they cannot stand it anymore. And some will stick it out throughout the downturn. So who are the buyers at this stage? Some are the so called bargain hunters that buy when the market has fallen over 30% (only to sell again when it falls another 20%), or maybe buy more (because they think they are dollar cost averaging and will make a packet when the price goes back up - if and when it does). Some are those with stops covering their short positions, whilst others may be fund managers and individuals looking to rebalance their portfolios. What you have to remember during both an uptrend and a downtrend the price does not move straight up or straight down. If we take the downtrend for instance, it will have lower lows and lower highs (that is the definition of a downtrend). See the chart below of the S&P 500 during the GFC falls.  As you can see just before it really started falling in Jan 08 there was ample opportunity for the smart money and the technical traders to get out of the market as the price drops below the 200 MA and it fails to make a higher peak. As the price falls from Jan 08 to Mar 08 you suddenly start getting some movement upwards. This is the bargain hunters who come into the market thinking the price is a bargain compared to 3 months ago, so they start buying and pushing the price up somewhat for a couple of months before it starts falling again. The reason it falls again is because the people who wanted to sell at the start of the year missed the boat, so are taking the opportunity to sell now that the prices have increased a bit. So you get this battle between the buyers (bulls) and seller (bears), and of course the bears are winning during this downtrend. That is why you see more sharper falls between Aug to Oct 08, and it continues until the lows of Mar 09. In short it has got to do with the phycology of the markets and how people's emotions can make them buy and/or sell at the wrong times. "I'm not aware that any US bank has any way to access your credit rating in France (especially as you basically don't have one!). In the US, banks are not the only way to get finance for a home.  In many regions, there are plenty of ""owner financed"" or ""Owner will carry"" homes.  For these, the previous owner will provide a private mortgage for the balance if you have a large (25%+) downpayment.  No strict lending rules, no fancy credit scoring systems, just a large enough downpayment so they know they'll get their money back if they have to foreclose.  For the seller, it's a way to shift a house that is hard to sell plus get a regular income. Often this mortgage is for only 3-10 years, but that gives you the time to establish more credit and then refinance.  Maybe the interest rate is a little higher also, but again it's just until you can refinance to something better (or sell other assets then pay the loan off quick). For new homes, the builders/developers may offer similar finance. For both owner-will-carry and developer finance, a large deposit will trump any credit rating concerns.  There is usually a simplified foreclosure process, so they're not really taking much of a risk, so can afford to be flexible. Make sure the owner mortgage is via a title company, trust company, or escrow company, so that there's a third party involved to ensure each party lives up to their obligations."