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I've always thought the answer is "no" - after all the company makes no money from the stock price unless they issue new stock, and then they make money from whoever buys it then.

However there's a recent article (mirror w/o paywall) in The Wall Street Journal (i.e. the authors of which are presumably familiar with the financial markets) which seems to suggest otherwise. The title is:

Wall Street Steered Billions to Blacklisted Chinese Companies, House Probe Finds

And the first paragraph is:

A congressional investigation found that Wall Street used billions of dollars of American retirement savings and other investments to buy shares in index funds that included more than five dozen blacklisted Chinese companies.

If the picture in the first paragraph of this question is right, buying an index fund that includes the blacklisted companies doesn't seem like it does anything; in fact the Wall Street managers were doing their job of making money for their clients.

I'm wondering if WSJ is being sensationalist, or if there's something I'm missing.

Related: Does trading (or abstaining from trading) a company's stock help or hurt the company? which appears to deal with the general case, but not this particular one.

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    The WSJ isn't making these claims, the House Select Committee on the Chinese Communist Party is. Keep in mind that we're in an election year...
    – 0xFEE1DEAD
    Commented Apr 20 at 2:31

1 Answer 1

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The article is behind a paywall so I can't read it, and so can't address specific companies.

Generally, publicly traded companies only directly benefit from stock sales during the IPO, or occasional secondary offerings of company stock. Post the IPO, money from stock sales goes from the stock purchaser to the stock seller, without any portion going into the treasury of the company.

I believe the issue here is that China is a "hybrid" economy. The People's Liberation Army or other parts of the Chinese government own outright, or are significant shareholders of many Chinese corporations. There is also a suspicion that even companies not formally controlled by the government do the government's bidding on request. So, if the Chinese government owns stock, they can directly benefit from selling that stock to an index fund, and can funnel that money back into technology development. Keeping that from happening is the point of the blacklist.

These also might not be index funds in the stock of public companies. They could be bond funds or private equity funds. Purchases of those sorts of index funds could have more direct impact on the cash position of the companies.

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