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When a stock market price for a company suddenly takes a nosedive, a stakeholder may wonder where the money they invested went. Well, the answer's not so simple as "someone pocketed it.

Money that enters the stock market through investment in a company's shares stays in the stock market, though that share's value does fluctuate based on a number of factors. The money invested initially in a share combined with the current market value of that share determine the net worth of shareholders and the company itself. It may be easier to understand this given a specific example such as three investors — Becky, Rachel, and Martin — entering the market to buy a share of Company X, wherein Company X is willing to sell one share of their company in order to increase capital and their net worth through investors.

To calculate the net value of these individuals, at this point, one would have to assume the current stock exchange rate for the stake, then add that to their capital in the bank if the individual owns stock while subtracting the rate from those who are down a share. Note that in this situation nobody put more money in the bank from the down market. Marvin was the big winner, but he made all his money before the market crashed.

It is true that Company X's net value does go up when the stock price goes down because when the price of the stock plunges, it becomes cheaper for Company X to repurchase the share they sold to Martin initially. Note that unless they actually make this transaction Company X does not gain or lose any cash from changes in the share price.

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Lastly, consider Rachel's situation. By constructing an example, we can see where the money went, and see that the guy making all the money made it just before the crash happened.

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