Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

The Long-Term Stock Exchange Opens for Business

blog.ltse.com

Post reply on HN
Print view View original

101–110 of 561 posts

Re: The Long-Term Stock Exchange Opens for Business

#101

Post by DennisP »

nicoburns wrote: post #6
picodguyo wrote: post #3

"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 have no idea if this solves the problem, but I think the problem is shareholders. Specifically, a proportion of shareholders favour short-term profits, and those shareholders outcompete the long-term minded shareholders leading them to have greater influence over time. These short-term shareholders are extracting value at the expense of wider society, and it's a massive problem.

One solution might be for shareholder votes to be weighted by the length of time they commit to hold the shares.

Re: The Long-Term Stock Exchange Opens for Business

#102

Post by eries »

fastball wrote: post #97

I have a question: what exactly is different? Wasn't clear in the blog post. Do you prevent day-trading or something similar?

We require companies that list with us to adopt corporate governance that aligns their behavior and incentives to the long term.

I know that doesn’t sound super sexy but we believe this is a high-leverage point for reforms

We will have more to say on reforms that relate to reading in the future, but we don’t limit the ability of “tourists” to trade in and out of stocks as normal.

Re: The Long-Term Stock Exchange Opens for Business

#104

Post by QuesnayJr »

dcolkitt wrote: post #29
picodguyo wrote: post #3

"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 shareholder…

The evidence is that the merged firm is worth more than the two component firms, but it's the target that reaps the gains. This suggests that acquirers tend to overpay.

See page 111 of this survey paper: https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.15.2.103

Re: The Long-Term Stock Exchange Opens for Business

#105

Post by mcny »

crazygringo wrote: post #91

With all respect to Eric, I strongly believe the concept of forcing "long-term investment" is ultimately a scam. At the end of the day, it's fundamentally a blank check for management to misbehave -- to misspend money, pursue pet projects rather than real business goals, and have nobody to tell them no. There is nothing inherently short-term about the stock market -- this is a myth that keeps getting repeated but has…

> But if you prevent people from selling, then you're preventing the market from holding a company accountable when its management messes up.

Is it even possible to hold management accountable for anything at all? Personally, I think executive compensation is the real culprit.

I've tried to think of ways to put a cap on compensation but I can't think of any way especially since the management of one company is on the board of another and they are all in it together. Also something I didn't know until recently: board members get paid! How is that not the dumbest thing in the world, I will never know... Personally, I think board members in public companies should get ZERO compensation, no travel allowance, no perks. They own stock, don't they? but I digress.

Is there a way to cap executive compensation to a multiplier of the lowest salary paid by the company? like 10x or 50x something? Like if the lowest pay is USD 15 per hour or USD 15 * 2000 = USD 30k then the highest executive compensation (including stock grants, bonuses etc) may not exceed USD 30k * 50 = USD 1.5M which isn't too bad.

Is it possible to codify something like this?

Re: The Long-Term Stock Exchange Opens for Business

#106

Post by eries »

zbruhnke wrote: post #44

So excited to see this vision come together Eric. I honestly hope one day we're taking HMBradley public on the LTSE. I have never felt more aligned with a mission or a vision, Systematically allowing companies to take a long term view without being punished is what the market needs. Or put another way ... Adam Smith > Milton Friedman I cannot wait to see where this goes and the mechanics LTSE puts in place to help re…

Thank you!

Re: The Long-Term Stock Exchange Opens for Business

#107

Post by jl2718 »

MrPowers wrote: post #7

Buffett, Bogel, and other famous financial folks signed a doc to overcome short-termism in 2009 that goes into more technical details: https://assets.aspeninstitute.org/content/uploads/files/cont... Modern executives have incredible pressure to hit quarterly numbers and the ones that provide value in the long term are the ones that can effectively ignore this pressure. Short term pressure also forces firms to play ac…

This is a good example of an accounting trick that should not be allowed by an exchange-listed company. It’s simply a trick to make a loss not count against earnings. It’s not even shown as a liability like a self-loan would. In M&A situations it’s usually shown as an asset. The point being that you can’t trust the earnings number and you can’t trust the balance sheet asst value, so you really don’t know anything about a stock. I’m surprised that no analyst firm has published a common GAAP-based valuation. Perhaps because it’s impossible, but that underlies the problem for small investors.

Re: The Long-Term Stock Exchange Opens for Business

#108

Post by Galanwe »

pmart123 wrote: post #71
SamBam wrote: post #9

Earlier quoted context omitted.

Yes, I feel like more of an explanation is required. Investors in existing exchanges already understand the different metrics companies might be categorized under -- value vs growth, for example -- and this seems like "extra-long-term value." But does that require a new exchange, or just a new valuation for companies? How about an index fund that invests only in such companies? I would probably invest in a "Vanguard…

In Europe, companies like LVMH and L'Oreal has bonus dividends or extra voting rights for long-term institutional shareholders already. Essentially, if you hold onto shares for over 1 year, 2 years, etc., you can offer shareholders additional incentives.

Do you have a source for this? I don't see how that could be possible, unless they created a new share class for these long term investors.

The price of the share has to be adjusted at the dividend ex date to reflect the drop of value induced by the dividend payout. If not every holder of the share class benefited from it, then this is obviously unfair.

Now if you are talking about different share classes, then they would have to either be issued to current shareholders (e.g as rights issuance, in which case every shareholder could have them, long term or not), or publicly traded (same thing basically, everyone could have them, long term or not), or privately traded. In that last case, I would not really say this is "for long term investors", it's more a matter of private equity / politics / governance. Don't expect to enter that kind of deal unless you are a _big_ institutional investor.

Post reply on HN