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The Long-Term Stock Exchange Comes to Life

blog.ltse.com

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Re: The Long-Term Stock Exchange Comes to Life

#41

Post by lozenge »

jerf wrote: post #23
whack wrote: post #16

"Tenured shareholder voting power, meaning that a shareholder’s votes would be proportionately weighted by the length of time the shares have been held" I wonder if we're going to see the rise of holding companies just to get around this rule. "Our holding company owns shares in XYZ, and will never sell those shares ever. Instead of buying/selling XYZ directly, you can instead buy/sell shares in our holding company.…

It seems like sufficiently clever lawyering ought to be able to prevent this, by tying the voting power to the entity that has the right to obtain the benefits of the stock price going up. At the very least this prevents the LLC hack.

In this case, I would have voting power for each of the thousands of companies in my pension plan.

Re: The Long-Term Stock Exchange Comes to Life

#42

Post by nostrademons »

whack wrote: post #16

"Tenured shareholder voting power, meaning that a shareholder’s votes would be proportionately weighted by the length of time the shares have been held" I wonder if we're going to see the rise of holding companies just to get around this rule. "Our holding company owns shares in XYZ, and will never sell those shares ever. Instead of buying/selling XYZ directly, you can instead buy/sell shares in our holding company.…

It makes me wonder if we'll see a Gresham's Law effect as well. A financial services company creates a new fund ABC which exists solely to hold shares of LTSE company XYZ. Its fundamentals should be completely coupled with XYZ, except for the voting rights and restrictions on trading. ABC is then listed as an ETF, with no restrictions on trading, and weights votes on XYZ based on number of shares with no tenure restriction. Because new holders of ABC have more rights than holders of XYZ, all new trading would occur in ABC.

The LTSE serves its purpose of incentivizing long-term ownership of XYZ, but it's a pyrrhic victory: whenever an XYZ shareholder wants liquidity, rather than sell, they could borrow shares of ABC with their XYZ shares held as collateral (by definition, they have the same fundamentals) and short-sell the ABC. Or if they truly want out, they sell their XYZ shares to ABC (no other buyer would be interested, if they can get the same ownership claim with fewer restrictions by buying ABC directly), which then issues new shares on the normal public markets to maintain the peg. Either way, owners of XYZ are still incentivized to care about the short-term price movements of XYZ (through its ABC proxy) on the public markets, because they can achieve liquidity by proxy.

Re: The Long-Term Stock Exchange Comes to Life

#43

Post by ChuckMcM »

I like it conceptually but I'm not sure how different it is from schemes where the founders have 10x voting rights to big chunks of stock (like Facebook and Google). These companies, from a voting perspective, can't get bullied by activist share holders but it doesn't help.

The pressure on stock price and its desirability comes in part from using it as compensation (it goes up and your employees with ISOs stick around, it goes down and that 'stock offer' has no drawing power) and using stock to buy other companies (virtual capital). These pressures exist outside the function of voting and are just as prone to creating 'short term thinking' effects. After all gaming the stock price is a universal executive sport and to get rid of that, you have to get rid of the association between high stock price and tangible short term benefit.

Re: The Long-Term Stock Exchange Comes to Life

#44

Post by eries »

qubex wrote: post #6
pavel_lishin wrote: post #2

It would be nice if they explained what it actually was. This paragraph has zero informational calories: > The LTSE is designed to remove the short-term pressures that plague today’s public markets and reorient companies and investors around long-term thinking. Through brand new listing standards, software tools, and advocacy, we’re reinventing the public company experience with novel approaches to executive compensa…

Thanks for posting that. Have you found any reference to how they would handle short selling or derivatives? What if my ownership is of negative duration (naked short), how would that affect the average against which the seniority is measured (clearly I would have no title to voting). It has to be a relative measure since otherwise if everybody just bought the stock everybody’s rights would be 0 and nobody could vote…

See above - our rules do handle derivatives and options elegantly (imho), but I can’t say too much about how it works yet.

Re: The Long-Term Stock Exchange Comes to Life

#45

Post by filleokus »

choxi wrote: post #21

Can someone tell me if this idea is crazy? I've noticed that fundraising and liquidity are common problems for startup founders, and it seems to me that the public stock market could solve many of those problems. What if all startups were publicly traded entities right after incorporation? Some of the benefits you would gain as a founder: - A larger pool of potential investors. You would have access to investment fro…

I have been thinking about the same thing, and I agree with the benefits you have stated.

In my part of the world (Sweden) we have two market places for quite small companies, Nasdaq First North and Akitetorget.

Akitetorget is somewhat strange, I think it is formally not regulated as a stock market, and that the companies listed there does not need to be "publicly listed". Like the grey markets for non-public companies I've read about, but perhaps less grey.

First North however is a "real" stock market that works the same way as its big brother Nasdaq OMX, but with lesser demands and cheeper entry.

Still, even First North is probably to expensive to list a startup right at incorporation.

I think the biggest hurdle to overcome is to balance the requirements of public disclosure and quarterly reports etc. with cost of listing. If almost no requirements would be set, it would be very cheap to list but also very hard to safely trade on the exchange (alá ICO's). On the other hand, with too stringent requirements it would be too expensive to list as an early stage startup.

Re: The Long-Term Stock Exchange Comes to Life

#46

Post by eries »

jgh wrote: post #13

Their about page is kinda weird. Unless there are a bunch of people not listed, it seems like there are only 3 people in the company who aren't a manager of some kind. For example there are 2 software engineers, a software engineering manager, a VP of technical operations, and a vp of engineering.

Indeed. We don’t list most of or employees to protect their privacy. This is a pretty controversial project.

Re: The Long-Term Stock Exchange Comes to Life

#48

Post by eries »

ringaroundthetx wrote: post #9

Unless this was launched by State Street or Vanguard how would anyone think this was a good idea or effective idea More like Zero Liquidity Stock Exchange am I right?

The way the LTSE is designed allows it to participate in the same level of liquidity as conventional exchanges. There’s absolutely no difference from that POV

Re: The Long-Term Stock Exchange Comes to Life

#49

Post by eries »

thrill wrote: post #12

I find some irony in that the frequently stated mission of the LTSE is, well, long term thinking, and yet the most recent Dec 7 medium post is about how excited they are to be accelerating their launch by pairing with an existent platform.

It’s a paradox of startup life that the best way to sustain a long-Term vision is via rapid experimentation. Amazon is a great example of this, if you want to see it at scale, but there are many others. So I don’t see any irony here.

Re: The Long-Term Stock Exchange Comes to Life

#50

Post by phkahler »

whack wrote: post #16

"Tenured shareholder voting power, meaning that a shareholder’s votes would be proportionately weighted by the length of time the shares have been held" I wonder if we're going to see the rise of holding companies just to get around this rule. "Our holding company owns shares in XYZ, and will never sell those shares ever. Instead of buying/selling XYZ directly, you can instead buy/sell shares in our holding company.…

Your concern is only the tip of the iceberg. Any set of rules will be gamed. The only way I can think of (and it can probably be gamed) that would really put the long term into the executives mind is to have most of their compensation based on the value of the company a few years after they're done. But given the existence of options and shorting stocks and any number of ways to mitigate risk or make money that don't depend on positive outcome for the average investor, anything can be gamed.

With a shift to long term outcomes, one could do any number of things that are short term bad to line their pockets and claim the benefit is further down the road. The problem isn't really about short or long term goals - does Amazon or Tesla give a rats ass about profit next quarter? No, and IMHO one of those is a solid company while both have high valuations.

In some cases I think the answer is to strip investors of control. They are the ones allegedly pushing short term profits at the expense of the long term. But what is ownership if not a form of control?

Another thought I keep coming back to is dividends. A proper investment gives returns without having to sell your stake. Lets provide incentives for companies to share profit rather than pump stock prices, then everyone can get excited about the right things. This has its downside too in cases where growth may require reinvestment. Perhaps forcing dividend payments for all cash equivalents above some threshold? I dunno, there are a lot of ways to approach this and none of them are good for all companies.

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