alright alright, let the UCSD economics drop-out student explain:
First off, there is no such thing as an infinite amount of shares; shares are presently finite in quantity. Therefore, there is a finite (fixed) quantity of UVSE shares at any point in time. Yes, the amount of shares can be increased by the company using a variety of procedures, one such procedure occurred last time and led to UVSE's share dilution up to 250 million shares, but let's not get into those details. Now, the question remains: how does a stock price drop? Many people understand how a stock price drops, but some do not, so that is why an explanation is in order. A stock price drops once there are more sellers willing to sell the shares they hold at a lower and lower price. A "trade" goes through when a seller's ask price is met by a buyer's bid price, and consequently the quantity of shares owned by the seller become the new position of the buyer. Now, to understand this more concretely, let us use the example of an auction, because that is the mechanism by which stocks trade.
Picture an auction room, with a auctioneer at the stage and a line of sellers next to him, and picture in front of this stage an audience of seated individuals. The seated individuals are the buyers, and the individuals standing in line on the stage are the sellers. And lastly, the auctioneer functions much like your brokerage. Now, for the sake of simplicity in this example, let's say that each of the sellers is holding only ONE computer that he wants to sell, and each seller has a different price that he is willing to sell the computer at. There are ONLY 10 sellers total, and thus only 10 computers available for sale. This is exactly like in stocks, how there is a finite number of sellers holding a finite number of shares. The only difference is that in stocks, we do not know how many sellers there are and how many buyers there are, and we also do not know how many shares each seller possesses. What we will always know, however, is the quantity of shares available. This is called the shares outstanding, and if the company ever wants to change this they will always have to go through procedures to increase or decrease the amount of shares. But you must understand that shares do not increase or decrease everyday. The volume of shares traded increases or decreases everyday, but that is not the TOTAL amount of shares in existence.
Back to our example here, some sellers want to sell at high prices, so they hold on to their computers and remain in line, and some sellers want to sell at lower prices, so they will step up to the auctioneer with their computer to place it up for auction. So, let's say the auctioneer starts the bid off at what the computer was priced at yesterday, and let's say it was priced at $100 yesterday. Now, whoever wants to sell at $100 will step forward and present his computer for sale at $100. If there is a bid for $100, then that means the buyer wants the computer for $100 and the seller will accept since he wanted $100 for it as well. Now a transaction or "trade" has gone through, and the computer remains priced at $100. Note that the auctioneer gets compensated for facilitating the trade between the buyer and the seller, and will receive a small amount of money from the sale. This action is much like how all brokerage houses take a commission for every stock buy or sale we make. Next, a second seller presents his computer and this guy asks for $110, but NO ONE in the audience of buyers bids for his computer, and so he gets back into the line. Now, a third seller presents his computer for sale, but this guy asks for $100, and still, no one bids for the computer. Next, a fourth person places his computer up for sale at $90, since this guy is afraid that the value of the computer has fallen and he wants to sell before it prices lower. One buyer bids $90 and a trade is made. Next, a fifth person is now scared too, and so he puts his computer up for sale at $90 and a buyer bids for it and a trade goes through. And lastly, a sixth person puts his computer up for sale, but no one bids for it at $90 so he changes his asking price to $80 and someone bids for it; a trade is made. Note that NOT everyone in the group of sellers will sell, because many of them will choose to hold their shares and wait for a higher pricing. Note also that once a buyer has bought a computer, he now becomes a potential seller. This auction example shows how the price of the computer fell from a pricing of $100 at the start of the day, to a pricing of $80 by the end of the auction. The example also shows that NO new computer units were introduced into the auction, so the price of the computer unit declined EVEN THOUGH the supply remained fixed.
So you see, you must realize that when we talk about supply and demand, we are talking about supply in terms of how many sellers want to sell their shares, how many shares they want to sell, and how many buyers there are as well as how many shares these buyers want to buy. IF the quantity of sellers multiplied by the average quantity of shares they want to sell is greater than the quantity of buyers multiplied by the average quantity of shares they want to buy, THEN the stock price will price lower. Here's the arithmetic:
[(#sellers)x(average # shares selling) > (#buyers)x(average # shares bought)] --> lowered price per share
Yes, the # of shares sold will equal the # of shares bought at the end of the day, because in every transaction the shares are exchanged from the seller to the buyer. But the pricing will be lower if there are more sellers willing to sell their shares at a lower and lower price.
And as for your comment about how the other InvestorsHub member was explaining things in If-Then terms, I think that is a weak argument since almost everything is explained in conditional or causal terms. IF I flip this light switch, THEN the light will turn on. The computer programs and website coding we are using right at this minute uses some if-then logic in its code, so what you said is nonsensical, and I do not say that to be rude but only to correct you.
