Stock Market
Before understanding insider trading, you have to understand the stock market a little bit, because insider trading works only in the stock market. If a company needs money to grow its business or pay off debt, so one of the many ways is to distribute your stake among the common people. For this, the company comes out to IPO, and you can buy its stake directly by paying money to the company. Once you have bought the company’s stake by giving your money, it is not that you have to keep its stake with you till the lifetime of the company.
You can sell the shares you bought from the IPO at any time, after that when the company was selling the shares directly, then you did not get it or you did not take it. But now you want, you can now buy from anyone else and you can do this purchase and selling many times. Note that after the IPO, you are no longer buying the company’s shares directly from the company, nor are you selling shares to the company. You are just buying and selling second-hand shares.
So, there will be trading of IPO it will be the primary market, and where there will be trading of second-hand shares, it is called the secondary market. So every day you hear the news of the stock market, it may be the news of the secondary market. One more thing to understand is that things that are sold second-hand like a TV or fridge, after leaving it. The price of those things is decreased. Shares are like capital Shares, It doesn’t matter if they are old or not. Prices of shares depending on the supply and demand role.
Now on what basis will the price of these secondary shares increase or decrease? This depends on the business profit, if the company makes some innovative thing that will have high demand in the future then shares prices will go up. Due to its buying and selling, the secondary market becomes an investment vehicle. There are two types of investors in the share market, one who brings money and the other who brings experience. Those who bring money get experiences and those who bring experience get money.
Insider Trading
Sometimes there is some news that the stock exchange board has fined someone because he did insider trading of a company. Insider trading also had a small part in some movies like ‘Harshad Mehta scams’. Another popular stock market movie ‘Wall Street’ which was released in 1987 also mentioned insider trading.