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The Long-Term Stock Exchange Opens for Business

blog.ltse.com

21–30 of 561 posts

Re: The Long-Term Stock Exchange Opens for Business

#21

"They described the immense pressure on companies to pursue short-term results over creating value for future decades and generations." Where does this pressure come from? The board? Can't you appoint a board that is long-term friendly? Institutional investors? Wouldn't the same investors interested in the LTSE also be interested in you on the traditional market if long-term is part of your DNA? Shareholders? Shareho…

> Shareholders agree to all sorts of craziness if they like your company

In my very limited experience, it is the _company_ which must accept all sorts of craziness from the shareholders rather than the other way around. Which is also how it stands officially...

> Institutional investors? Wouldn't the same investors interested in the LTSE also be interested in you on the traditional market if long-term is part of your DNA?

Not clear at all that they would, if individual officers expect to have to justify short-term-losses.

Re: The Long-Term Stock Exchange Opens for Business

#22
I’m still trying to understand the rationale. They should create a comparison against the current public markets to highlight the differences.

Based on the “long term”, I’m guessing the core concept is no quarterly reporting, so companies can focus on long term initiatives.

However, how do they explain Amazon, who reinvested what would be their profits for over a decade, to continue expanding their business and build the massive Walmart juggernaut? All Bezos had to do was describe the strategy to the market, expand quarterly sales, and many investors were patient over the years.

Re: The Long-Term Stock Exchange Opens for Business

#23

"They described the immense pressure on companies to pursue short-term results over creating value for future decades and generations." Where does this pressure come from? The board? Can't you appoint a board that is long-term friendly? Institutional investors? Wouldn't the same investors interested in the LTSE also be interested in you on the traditional market if long-term is part of your DNA? Shareholders? Shareho…

There is no pressure. Good examples are Amazon and Tesla that make very little money and are valuable now because of their long term outlook.

If you really do believe it is investors driving short term outlooks, a different exchange wont make a difference to how many investors buy the stock.

Re: The Long-Term Stock Exchange Opens for Business

#25
The only way I think investors could invest more in companies with a long term view is better margining so you could borrow money to invest in companies without getting margin called. Eg you can buy a house with 5% down, but you can't do this with stocks because normal volatility means you'll likely be wiped out.

Re: The Long-Term Stock Exchange Opens for Business

#26
The density of unsubstantiated platitudes in the marketing for this is high even for silicon valley. There's a good evolutionary reason human beings focus on short term thinking. We have no demonstrable ability to forecast into the distant future!

Corporate governance is eff'd, and does promote short-term shenanigans, but technology that enables shareholder governance is the solution. Not just avoiding the price discovery process.

Re: The Long-Term Stock Exchange Opens for Business

#27
post #22

I’m still trying to understand the rationale. They should create a comparison against the current public markets to highlight the differences. Based on the “long term”, I’m guessing the core concept is no quarterly reporting, so companies can focus on long term initiatives. However, how do they explain Amazon, who reinvested what would be their profits for over a decade, to continue expanding their business and build…

Amazon is a great counter example and I don't have an argument that says Amazon does focus on short term at all, and certainly not to its detriment.

However, an exception to the rule is not the rule.

Re: The Long-Term Stock Exchange Opens for Business

#28
post #4

I read this article and skimmed the original and I'm still not sure what the exact details of this exchange are. No robo/quant investing? Minimum hold periods? No requirements for quarterly earnings? No penny stocks?

It looks like a SaaS analytics platform. Maybe they will have different data than normal Quarterly reports coming in from companies who want to be part of the exchange.

Porsche SE was banned from certain stock indexes because they refused to publish quarterly reports. They claimed that too frequent reporting is not beneficial for companies. You can purchase Porsche SE stocks, but they are not listed in the DAX, which is the largest German stock index.

Re: The Long-Term Stock Exchange Opens for Business

#29

"They described the immense pressure on companies to pursue short-term results over creating value for future decades and generations." Where does this pressure come from? The board? Can't you appoint a board that is long-term friendly? Institutional investors? Wouldn't the same investors interested in the LTSE also be interested in you on the traditional market if long-term is part of your DNA? Shareholders? Shareho…

I'll give a shareholder's perspective. Management, when left unchecked, frequently engages in in wasteful empire building and prestige projects. The most apparent manifestation of this is in mergers and acquisitions. Decades of evidence shows that the median merger destroys shareholder value for the acquiring company.

Imposing strong controls on corporate management is one of the most important thing that shareholders can do. This might take the form of independent boards, which aren't handpicked by the CEO. Or the removal of poison pills (which raises the threat of a hostile takeover for underperforming companies). But most important of all is the existence of transparent, consistent, regularly evaluated metrics. That means quarterly earnings targets.

Like any job, CEOs need consistent feedback to keep their incentive aligned with those who employ them (shareholders). Management has shown time and time again, that when monitoring is weakened, they go off the reservation and destroy shareholder value. The good thing about earnings is that it's they're easy-to-measure, hard-to-fake tangible proof of continuing performance. In contrast stories about "long-term value" or intangible promises of future rewards are usually BS used to justify extravagant empire building while the CEO uses the company's balance sheet as his personal piggy bank.

Lest anyone think that evil Wall Street shareholders are hobbling visionary CEOs, observe the rare cases when management does prove its credibility. Prime example is Amazon, which time and time again has scarified short-term earnings for long-term development. And nobody could possibly claim that it's punished by Wall Street for this. The difference is that unlike 99% of CEOs, Bezos has conclusively proven his ability and alignment with Amazon shareholders.

Re: The Long-Term Stock Exchange Opens for Business

#30

The density of unsubstantiated platitudes in the marketing for this is high even for silicon valley. There's a good evolutionary reason human beings focus on short term thinking. We have no demonstrable ability to forecast into the distant future! Corporate governance is eff'd, and does promote short-term shenanigans, but technology that enables shareholder governance is the solution. Not just avoiding the price disc…

> We have no demonstrable ability to forecast into the distant future!

Well I woke up this morning and got myself a beer!

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