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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

#111

Post by chii »

eries wrote: post #53
ChuckMcM wrote: post #43

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 aroun…

That’s a good observation. Today’s Dual class systems only protect the founders from a specific kind of short-term pressure. But there are still thousands of employees overreacting to volatility and jumping at shadows. Our rules are designed to address the full “user experience” of being an employee in a public company, with the goal of aligning the whole enterprise towards more Long-Term goals.

employees should not be compensated with stock. Stock based compensation creates incentives for such employees to increase just the stock price without increasing the underlying value generation mechanism. Paying in stock also means you're forcing the employee to 'invest'. While it's true that paying with stock is a form of hand-cuffing to make sure the employee's incentive aligns with the company, i feel it's just too easy to 'game' this stock metric.

Re: The Long-Term Stock Exchange Comes to Life

#112

Post by chii »

toast0 wrote: post #51
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…

There is a market for this, the OTC or pink sheets. At initial listing and if the company itself or its insiders or affiliates are selling, there are required financial disclosures. I think there's resistance to public trading however because it generally requires more structured accounting (GAAP vs cash accounting), and invites external scrutiny and pressure.

> requires more structured accounting (GAAP vs cash accounting), and invites external scrutiny and pressure.

aren't all these good things? Prevents both scamming, as well as ensuring that the founders take a careful look at their business, and that it isn't purely fueled by stock/investment, but is generating profit?

Re: The Long-Term Stock Exchange Comes to Life

#113

Post by bsbechtel »

SomeCallMeTim wrote: post #100
WalterBright wrote: post #93

"short-term pressures were driving their decision-making, often at the sacrifice of the long-term potential of the business." This is a popular opinion, but I find it difficult to believe. It relies on the notion that stockholders are fools and unable to recognize when a company destroys its long term prospects for short term gain. The trouble is, once the short term gain is there, who are the short termers going to…

I have experienced short-term thinking, driven by stock market expectations, very directly. Working on a game, we had a build ready two weeks before the end of a quarter, but we weren't quite done. We had just a few minor tweaks that needed just two more weeks to complete, and we in fact delivered a complete game two weeks later...that was ignored, because it was more important to make their quarterly goal than to re…

How did those actions affect sales of the game, the short term stock price, and long term prospects of the company?

Re: The Long-Term Stock Exchange Comes to Life

#114

Post by rampage101 »

eries wrote: post #29

Hey everyone, Eric Ries here. I’m the founder and CEO of the LTSE (and also the Lean Startup guy). Happy to see the discussion here and will try and answer a few questions. Unfortunately, a lot of the details of how the LTSE works are subject to regulatory approval, so I can’t share too much while we are working out the details with them. Still, I’ll do my best to answer. Thanks for the comments and happy new year

Hi Eric, the idea sounds fascinating.

When will it be open for individual investors to make a deposit? Is there a list of companies which will be chosen for initial listing?

Re: The Long-Term Stock Exchange Comes to Life

#115

Post by gfody »

WalterBright wrote: post #109
chii wrote: post #108

Earlier quoted context omitted.

> It is not necessarily true that making a product better and delaying shipping is long term better for the company. a perfect game released later may either become a classic that has huge long tail potential. A early-to-market game may produce a short hit/fad that passes. It's almost random which will happen - as those doing these sorts of judgements prior to actually releasing have their own personal biases which c…

Of course people can misjudge the details. But that doesn't mean they are deliberately sacrificing the long term for the short term. It just means they are mistaken.

rushing a product out, putting extra pressure on your engineers, squeezing them, is always a sacrifice and a risk. and it's always a long-term loser. you can get away with it a few times, if you do it every single time your engineers will burn out or revolt if the product failure doesn't do it for them.

Re: The Long-Term Stock Exchange Comes to Life

#116

Post by jacques_chester »

IgorPartola wrote: post #68
phkahler wrote: post #50

Earlier quoted context omitted.

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…

I read somewhere about splitting control and ownership, but really you can’t. You either own a thing or you don’t. Time shares notwithstanding. I do like dividend paying stock, but is that not a form of short term thinking? “May me my dividend this quarter, I don’t care when happens next year!”

> I read somewhere about splitting control and ownership, but really you can’t. You either own a thing or you don’t.

In common law countries, trusts law means you can distinguish between who has controlling interest and who has beneficial ownership.

So you can own a thing but not own the thing.

If I own something on trust for you, I can control it, but only in your best interests. If you own it on trust for me, I can benefit from the ownership, but without a lot of other legal effects that would normally ride shotgun with a full and undivided ownership.

As usual: I am not a lawyer, this is not legal advice.

Re: The Long-Term Stock Exchange Comes to Life

#117

Post by jacques_chester »

qubex wrote: post #70
eries wrote: post #63

Earlier quoted context omitted.

Our rules follow existing SEC rules for beneficial ownership; they tend not to take a very CS-centric view of things :)

Does that mean that you do not speak of ownership in terms of a weighted graph of nodes, or that indeed your rules do break down when there is a possibility of circular references?

I imagine all such graphs in the USA will have humans as root nodes, since the 14th amendment makes it a bit tricky to create ownership edges into humans.

Re: The Long-Term Stock Exchange Comes to Life

#118

Post by danharaj »

WalterBright wrote: post #106
robbiep wrote: post #96

Earlier quoted context omitted.

There is absolutely no doubt that short term thinking is critical in the modern public company, and certainly examples of detrimental effects of it: at a simplistic level, when executive remuneration and bonuses depend on share prices with quarterly reviews, executive teams can (not do, this is not an absolutist position) focus on short term measures to boost their numbers - maybe they invest less in R&D, maybe they…

By the way, if you know of specific companies that are sacrificing long term for short term stock prices, you can make a ton of money by shorting their stock.

That's not necessarily true.

Re: The Long-Term Stock Exchange Comes to Life

#119

Post by jacques_chester »

eries wrote: post #40
startupdiscuss wrote: post #31

Earlier quoted context omitted.

My main question is: what is the LTSE? Is it a stock market? Will I be able to buy and sell shares on eTrade or another 3rd party platform? Who will list shares on it? If I had to guess, I would guess it is just like the NYSE except you can only buy and sell shares every 5 years or something.

LTSE = The Long-Term Stock Exchange Yes, it is in the same regulatory category as NYSE or NASDAQ. Yes it allows you to buy shares of listed companies in all the ordinary ways, including retail brokers. The best of the next generation of companies :) Not a bad guess, but not quite right either. Our detailed rules (all 900 pages of legalese!) will be public soon enough.

> Our detailed rules (all 900 pages of legalese!) will be public soon enough.

I look forward to taking a squiz.

I imagine there's a fair amount of wording intended to allow rules to be updated quickly as bugs are uncovered.

How are you insured? I imagine there will be a few lawsuits fired across the bow.

Re: The Long-Term Stock Exchange Comes to Life

#120

Post by robbiep »

danharaj wrote: post #118
WalterBright wrote: post #106

Earlier quoted context omitted.

By the way, if you know of specific companies that are sacrificing long term for short term stock prices, you can make a ton of money by shorting their stock.

That's not necessarily true.

! ‘The market can stay irrational longer than you can stay solvent’
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