what happens is, say there is a privately owned company, let’s say a restaurant. the owner, sarah, is doing a really good business. she has a bunch of different restaurants in 8 different states, and they’re making a lot of money. she wants to open even more restaurants, but she doesn’t have the money to do it as fast as she wants. so she decides to take the company public. when this happens, it has, what is called an “initial public offering” usually referred to as an “IPO”. say, (just for easy math) that they decide to offer 100 shares at a price of $2 each. their market capitalization at this point is $200. say all the shares are bought. the company now has $200 to open new locations that it didnt have before. say the stock price increases to $3 per share. keep in mind there are still only 100 total shares. they have not had a stock split, or anything like that. now their market capitalization is $300, however, the company has not gained any more money for itself. the people who bought it at the IPO, and later sold it earned that extra dollar.
does it make sense now?