A student remarks: "135,000,000 shares of General Electric were sold yesterday on the New York Stock Exchange, at an average price of $25 per share. That means General Electric just received a little over $3.4 billion from investors."Do you agree with the student's analysis?

A. No, these shares were likely traded in the secondary market, so General Electric would not receive any of the money.

B. Yes, these shares were likely traded in the primary market, so General Electric would receive a little over $3.4 billion

C. No, these shares were likely traded in an over-the-counter market, so GE would receive less than $3.4 billion.

D. Uncertain, since the sale would be subject to capital gains, more information is required

Question

David Arnold

Business

19 July, 17:24

A student remarks: "135,000,000 shares of General Electric were sold yesterday on the New York Stock Exchange, at an average price of $25 per share. That means General Electric just received a little over $3.4 billion from investors."Do you agree with the student's analysis?

A. No, these shares were likely traded in the secondary market, so General Electric would not receive any of the money.

B. Yes, these shares were likely traded in the primary market, so General Electric would receive a little over $3.4 billion

C. No, these shares were likely traded in an over-the-counter market, so GE would receive less than $3.4 billion.

D. Uncertain, since the sale would be subject to capital gains, more information is required

+4

Answers (1)

Know the Answer?

Bronson Bryant · Answer 1

The correct option is B, no, these shares were likely traded in the secondary market, so General Electric would not receive any of the money.

Explanation:

Buying and selling of General Electric shares on the New York Stock Exchange means that existing shares of the company exchange hands between investors who hold the shares wishing to sell and the investors who want to buy the shares, in effect, General Electric does not receive a dime from the transactions.

In essence, the student's analysis is wrong because GE would have received cash if they had come to the market to sell shares publicly as in the case of Initial Public Offer (IPO).