> shareholders who hold their shares for a long time will get more votes
What prevents me from selling my vote, without technically selling my share?
The Long-Term Stock Exchange Is Worth a Shot
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Re: The Long-Term Stock Exchange Is Worth a Shot
#22> Anyway here's a story about the Long-Term Stock Exchange, which is a new planned stock exchange backed by Silicon Valley venture capitalist types that will have "tenure voting," in which shareholders who hold their shares for a long time will get more votes.
This has been discussed already on HN, and I believe it's a bad idea.
All that would do would be to create two kinds of shares : the normal ones and those with high voting power. The market would then want to price them differently, and if you want to prevent long-term owners to sell their shares (for instance if they want to enjoy the increased value), then you are doing some kind of capital control.
It's just a bad idea. In a free country capital can be bought and sold : if you give voting rights to someone, he should be able to sell them, which would probably defeat whatever purpose you had when you gave those rights in the first place.
Re: The Long-Term Stock Exchange Is Worth a Shot
#23I am by no means stating it as a conclusion, but rather just as a discussion point, how does this differ from the mutual funds and etfs under a single umbrella, i.e. something like vanguard? Where the stated mission is sort of long term stewardship over the short term activist role. Now, how well that mission is fulfilled is another thing. The reason I note vanguard specifically is because of the current activist spa…
It's worth asking why we make the distinction between "activists" and big fund managers in the first place. Shouldn't all fund managers be doing what's best for their shareholders?
You should check out John Bogle's "Clash of Cultures" (founder of Vanguard), he discusses this problem at length.
In general I'm inclined to agree with you though. This thing has a lot of hype around it because it's backed by Eric Ries, the "Lean Startup" author, but I don't really see a problem with the NYSE/Nasdaq in their current form. People overlook the liquidity, depth, and other benefits of such well-run exchanges; it's not at all clear to me that an average investor would be better off on this "long-term" exchange, where I'm sure volumes will be a lot lower, and bid/ask spreads will be wider than on a "bad" exchange with many "short-term" players, who, as a side-effect of their actions, create tons of liquidity for small-potatoes investors.
Frankly, I don't understand the point of this at all. There's nothing stopping a long-term oriented investor from holding shares a long period of time in today's markets. And there are real risks of corporations being too long-term focused. The existence of Amazon, at a minimum, should show that companies with 10-20 year investment horizons are tenable under the current system.
Re: The Long-Term Stock Exchange Is Worth a Shot
#24This article misses the reason why short term investors are potentially harmfull. The author writes: "One basic and important implication of this theory is that, if you hold a share of stock for a minute, you will want the company to increase its long-term earnings power during that minute. If, during your minute of ownership, the company announces "we have sold all our factories and ruined our productive capacity, b…
Yes. The original premise of the article is:
> The value of a share of a company is equal to the market's expectation of the present value of its future free cash flows.
Emphasis on "expectation". It may change wildly in the short term; reasons include hype, speculation, and news that has only short term relevance.
Re: The Long-Term Stock Exchange Is Worth a Shot
#25There is a pervasive idea that longer term investments are somehow better (morally superior, more socially responsible) than short-term. This stems from the ancient prejudice toward financiers (usually jews) and the corresponding ancient prejudice against speculation. Let me debunk it: - Suppose an 18 year old and a 80 year old each buy a share of company XYZ's stock. Whatever their goals might otherwise be, the 80 y…
For a proper debunking, you need to address the fact that it's usually pretty easy to wring cash out of a business, but you can only do it once.
That's why longer term investments are preferable. It puts the focus on building sustainable value for its owners rather than balance sheet gymnastics.
Most of your argument here is in favor of liquidity, but that's not the issue in question.
You're also mistaking the role of stock exchanges, which are secondary markets. It's rare for companies to issue new shares to raise money. Not only does it send a bad signal and piss off existing shareholders, but its also one of the least efficient ways of getting capital. They'd prefer long-term debt.
Re: The Long-Term Stock Exchange Is Worth a Shot
#26Earlier quoted context omitted.
Contrived? Yes. Meaningless? No. Voting rights are powerful. That's the point of the long-term exchange. In existing exchanges, going long and short in equal amounts on the same stock simply cancel each other out. But in a "long-term exchange", taking this same position (or lack thereof) gives me a valuable asset: voting power that grows over time.
Sure, but the price of the stock probably reflects that voting power. For example, right now there are different share types that you can buy from the same company that have different voting rights.
Yes, but... the article suggests that in the long-term exchange, the voting power resets with a change in ownership.
So while a share that has accumulated a lot of voting power is valuable to me, you wouldn't necessarily pay any more for it, since the power doesn't transfer to you.
Re: The Long-Term Stock Exchange Is Worth a Shot
#27Earlier quoted context omitted.
> Can a company exist in both the "normal" exchange and the "long term" exchange at the same time? The fact that a company is listed on multiple exchanges doesn't mean it has different sorts of stock for each exchange. This real subject of this article is tenure voting , which is an aspect of the stock (not the exchange). The reason exchanges are mentioned is that exchanges have rules about the sorts of stock they wi…
> This problem is so obvious that it must have been addressed by the people proposing this. I think this is just optimism, it would be nice to have an actual reason to think this is the case.
I looked at the people backing the exchange and as far as I can tell, no one actually has a proper finance background, let alone a background in exchanges (which is, from what I've read, a pretty esoteric and specialized area within finance).
The idea of Eric Reis running a stock exchange is... strange to me.
Re: The Long-Term Stock Exchange Is Worth a Shot
#28There is a pervasive idea that longer term investments are somehow better (morally superior, more socially responsible) than short-term. This stems from the ancient prejudice toward financiers (usually jews) and the corresponding ancient prejudice against speculation. Let me debunk it: - Suppose an 18 year old and a 80 year old each buy a share of company XYZ's stock. Whatever their goals might otherwise be, the 80 y…
I think your example scenario would have benefited from some qualification as you paint the sentiment around the decision to put a stock up for sale in a somewhat negative light when in fact there can be several factors at play.
> The person who sold the shares had deemed the stock a not-so-good investment compared to other options and wished to liquidate.
That's one possible explanation for the decision to sell. The person could also be motivated to sell (a portion) because the current price would lead to a modest return on the initial investment; or perhaps the person suddenly needs cash and decided that a stock (from among several positions) would yield a certain amount of liquidity, ROI considerations will generally not factor into distress sale decisions.
Re: The Long-Term Stock Exchange Is Worth a Shot
#29> Anyway here's a story about the Long-Term Stock Exchange, which is a new planned stock exchange backed by Silicon Valley venture capitalist types that will have "tenure voting," in which shareholders who hold their shares for a long time will get more votes. This has been discussed already on HN, and I believe it's a bad idea. All that would do would be to create two kinds of shares : the normal ones and those with…
If I got this correctly, when you sell your shares with high voting power, they lose their high voting power.
Re: The Long-Term Stock Exchange Is Worth a Shot
#30Earlier quoted context omitted.
Sure, but the price of the stock probably reflects that voting power. For example, right now there are different share types that you can buy from the same company that have different voting rights.
Yes, but... the article suggests that in the long-term exchange, the voting power resets with a change in ownership. So while a share that has accumulated a lot of voting power is valuable to me, you wouldn't necessarily pay any more for it, since the power doesn't transfer to you.
this is reminding me of LLCs holding real estate in California, where the LLC and bought and sold but not the real estate, thereby preserving the low tax basis for prop13 purposes.