From grandvillemed.com

Keegan Taberner wrote an article on his blog about how the Ebola outbreak is affecting stock prices of medical research companies working towards a cure. Not surprisingly, these company’s shares have increased in value. In his article, Keegan predicts that prices will continue to rise “as investors look to make a quick dollar, or even, help fund the company that cures Ebola.” While the first reason seems more likely, the second is still viable for someone pure of heart. Or is it? Will these companies actually be able to spend more on research now that their stock value is higher? On one hand, the stocks that owners own are now more valuable, so they appear to be richer and perhaps more willing to invest additional resources towards finding a cure. However, since they have not actually sold any stocks, there has been zero cash flow into these companies. This is a perfect example the difference between primary and secondary markets. Since stocks for these companies are currently being traded on the secondary market, all transactions are occurring investor to investor and not between the company and investors. The only way the increased value of these companies could lead to an increase in cash flow would be if the owners decided to dilute their ownership and sell more stocks on the primary market. For now, although this misconception may help investors sleep better at night, their contributions are not being used to find a cure.