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IPOs are expensive and cumbersome – Try a direct listing, like we did at Spotify

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Re: IPOs are expensive and cumbersome – Try a direct listing, like we did at Spotify

#101

Post by tehlike »

hndl wrote: post #65
tehlike wrote: post #37

Earlier quoted context omitted.

Having shares of a private company is still possible with retirement accounts. It is a bit more work. You can roll an ira to an self-directed ira and invest in all sorts of financial instruments including real estate.

Can you share some resources here (e.g., services you've used)?

Someone referred me to equity trust. I am still looking around what to do with my ira - I am currently comfortable with stocks in vanguard, but once it grows to be sizable, RE won't be out of possibilities.

Re: IPOs are expensive and cumbersome – Try a direct listing, like we did at Spotify

#102

Post by justin66 »

gibybo wrote: post #72
JamesBarney wrote: post #70

Earlier quoted context omitted.

>Whether it's worth your time messing about with this is a separate matter entirely. Yeah, transaction fees can really eat into your gains unless you're a very good picked or are interesting millions.

>Yeah, transaction fees can really eat into your gains unless you're a very good picked or are interesting millions. Buying 20 stocks would only cost you ~$120 (at $6/trade). For a $100k portfolio, that's an expense ratio of only 0.12% if you did it once per year.

Buying some amount of each stock once a year is probably not how you're going to be doing things if, for example, you want to keep your portfolio balanced to match your desired asset allocation. You'll probably need to make more trades than this.

You're also more vulnerable to losing a bit of money to the bid-ask spread than Vanguard or Fidelity are.

Re: IPOs are expensive and cumbersome – Try a direct listing, like we did at Spotify

#103

Post by justin66 »

beambot wrote: post #94
mathattack wrote: post #83

Earlier quoted context omitted.

Much easier to just buy an index.

Yes & no. Buying individual stocks lets you exercise some level of moral control over which companies you tacitly back. Don't want to support diabetes-inducing sugar water? Then avoid soda companies. Don't want to support environmentally-unsound logging, mining, or petro companies that exploit unregulated externalities? Great, you can select the ones that don't. Don't want to back companies that exploit 3rd-world swe…

> Investment dollars are like voting

No, not really. If the market is efficient, the price of a given security isn't dependent on whether or not you've invested in it. Your conscience is clear in that you haven't profited from but you haven't affected anything.

Investment can be like voting in the sense that you can vote your shares, or even take legal action, as an investor and perhaps cause change that way. Sadly there's no way right now to do this if you own shares in an index fund.

Re: IPOs are expensive and cumbersome – Try a direct listing, like we did at Spotify

#104

Post by roguecoder »

justin66 wrote: post #103
beambot wrote: post #94

Earlier quoted context omitted.

Yes & no. Buying individual stocks lets you exercise some level of moral control over which companies you tacitly back. Don't want to support diabetes-inducing sugar water? Then avoid soda companies. Don't want to support environmentally-unsound logging, mining, or petro companies that exploit unregulated externalities? Great, you can select the ones that don't. Don't want to back companies that exploit 3rd-world swe…

> Investment dollars are like voting No, not really. If the market is efficient, the price of a given security isn't dependent on whether or not you've invested in it. Your conscience is clear in that you haven't profited from but you haven't affected anything. Investment can be like voting in the sense that you can vote your shares, or even take legal action, as an investor and perhaps cause change that way. Sadly t…

Even an efficient market will still have capital be more expensive for goods people disapprove of and aren't willing to support. An efficient market just means the price is discovered, not that the price solely reflects monetary outcomes.

Plus there's probably no such thing as an efficient market; determining future outcomes of a market is an NP-complete problem and there are finite traders, so unless P equals NP you are definitely on the moral hook for the impact of your investment decisions. https://arxiv.org/pdf/1002.2284.pdf

Re: IPOs are expensive and cumbersome – Try a direct listing, like we did at Spotify

#105

Post by roguecoder »

jjuhl wrote: post #29
rayhano wrote: post #20

I posted this article because we’re planning to do the same and wanted to gather thoughts from the tech community (the financial community has commented on this sufficiently to help inform our process). I thought it might help to share our motivations for eventually listing our company vs taking more VC: a. The public markets force transparency. This aligns with our values. b. Governance enforced by VCs (especially i…

Why are you trying to provide "reasons"? You'r a company. You just want to make the maximum amount of money. Everyone knows this. Why try to pretend anything else?

Then by your logic, these things the company values must be profitable choices.

Re: IPOs are expensive and cumbersome – Try a direct listing, like we did at Spotify

#106

Post by roguecoder »

krelian wrote: post #35
wildmusings wrote: post #16

Earlier quoted context omitted.

The whole point of owning part of a company is to collect dividends and/or sell your shares for more than you bought them for. But without going public, it can be difficult to do the latter.

Isn't the whole point of owning a company is have a share of its profits? That's why the stock market never made sense to me. The price and price gains or losses on stocks are not related at all to the profits.

You can think of a share as a bet on the future potential value. So past value was previously reflected in the share price, but sometimes high profits mean that the growth is over because there's not useful R&D to be doing, whereas sometimes low profits mean that growth is ahead. Future performance is also highly uncertain and influenced by external factors: geopolitics, demand for the product, other competitors, outside innovation, taxation changes, people's relationship to the CEO, the marginal cost of that investment relative to other similar investments that serve as close substitutes, etc. All of that information is going to be part of the price of the stock, because all of that information influences the future of the company.

Plus then since the future is unknowable, it's tied up with investor's personal risk profiles, discount factors and some straight up sentimentality. If you have a crystal ball and can predict the future perfectly, stock prices would correlate with profits, but even if the market was perfect, current profits would be related to past stock prices, not current stock prices.

(Oh, and to make it more complicated and basically impossible to model with linear equations, if you own stock you can influence those future outcomes both directly via shareholder activism and indirectly via the effect you have on a company's cost of capital, so the whole system is dialectic.)

Re: IPOs are expensive and cumbersome – Try a direct listing, like we did at Spotify

#107

Post by beavisthegenius »

will_brown wrote: post #44
gwbas1c wrote: post #27

Earlier quoted context omitted.

> It's to reward employees who may need to sell stock based compensation to pay bills and other things that require currency. Don't spend money before you have it. On the other hand, equity is worthless until it's fungible. Fungibility problems turn into retention problems. Otherwise, the company has to pay large bonuses to key employees who may decide to cut their losses.

>Don't spend money before you have it. That’s what the employee equity is in the first place...a way for the startup to spend money it doesn’t have to get the employee. The employee, in theory or at least tech anyway, is sacrificing a better salary at an established (likely public) company to join the startup in exchange for that small chance they make it up with the equity on the backside. Although everyone loves to…

In theory, an 83b election should be looked at for any restricted stock grants to minimize the ordinary income tax issue you describe. I know it's not always possible.

Re: IPOs are expensive and cumbersome – Try a direct listing, like we did at Spotify

#108

Post by nv-vn »

krelian wrote: post #35
wildmusings wrote: post #16

Earlier quoted context omitted.

The whole point of owning part of a company is to collect dividends and/or sell your shares for more than you bought them for. But without going public, it can be difficult to do the latter.

Isn't the whole point of owning a company is have a share of its profits? That's why the stock market never made sense to me. The price and price gains or losses on stocks are not related at all to the profits.

This is something that confused me for a long time, but I think I've started to understand. A company obviously has some intrinsic value (e.g. through its assets), and that's part of what's reflected in the stock. But change over time is inevitable in a companies assets (and earnings), so the point of the stock market is literally just to bet on that. The end goal is kind of abstract, because most successful companies will never get to the point where they're giving out massive dividends or liquidating their assets, but you can definitely watch a company grow. Even if you gained no dividends from holding 100% of a private company, it still seems better than not holding one (obviously) but it's hard to pin that value down unless we think about it in an abstract way. You can think of the value of a company as the sum of its net assets over time (discounted by inflation, risk, and opportunity cost). So for example, when Apple earns $2.34/share in a quarter, everything that isn't given out in dividends is being reinvested for the future (being turned into assets and earnings growth). Even if the dividends never reach 100% of what you originally paid for the stock, they will rise as Apple continues to grow (in the long term, at least). As the growth continues, the stock becomes more valuable because of the potential for higher dividends. So while the "reason" to own stock is to share their future profits, what you're really betting on is the future profits past your lifetime. The same idea can be applied to bonds, too. Even if you don't hold a bond long enough for it to mature, the underlying value still exists and you are the owner of it. For a 100 year bond, if people think the interest rate will outpace inflation more than before, the value of it goes up, so by holding onto the bond you are still invested in its future "profits", just less directly than waiting for it to mature. One of the really interesting things about financial markets, though, is their ability to craft really abstract assets and assign values to them. Stocks are definitely one of these and they are certainly more complex than they were 100+ years ago.

Re: IPOs are expensive and cumbersome – Try a direct listing, like we did at Spotify

#109

Post by gwbas1c »

tetromino_ wrote: post #45
gwbas1c wrote: post #27

Earlier quoted context omitted.

> It's to reward employees who may need to sell stock based compensation to pay bills and other things that require currency. Don't spend money before you have it. On the other hand, equity is worthless until it's fungible. Fungibility problems turn into retention problems. Otherwise, the company has to pay large bonuses to key employees who may decide to cut their losses.

> Don't spend money before you have it. Sometimes it can be hard to time your expensive emergencies. Drunk drivers, cancer cells in a loved one's body, natural disasters, and law enforcement officers having a bad day rarely wait for the moment when your assets are at their most liquid.

That's why you buy insurance and live within your means.

Re: IPOs are expensive and cumbersome – Try a direct listing, like we did at Spotify

#110

Post by arcticbull »

ironjunkie wrote: post #55
arcticbull wrote: post #50

Earlier quoted context omitted.

Retirement accounts can just as easily invest in Vanguard funds, side-stepping the 'high management fees' issue of target-date funds. Picking is more dangerous when you're playing to retire vs. playing to build wealth. Further, your asset mix should become more and more conservative over time.

That depends on your 401k. I agree that if you can switch to one with vanguard funds that's definitely the most optimal

I was suggesting rolling over at the first opportunity into an IRA
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