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How Wall Street Middlemen Help Silicon Valley Employees Cash in Early

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Re: How Wall Street Middlemen Help Silicon Valley Employees Cash in Early

#51

Post by a_c_s »

refurb wrote: post #31
themagician wrote: post #23

Earlier quoted context omitted.

That analogy isn't about odds. It's about the why. The reason we don't let 99% of people buy shares of private companies has NOTHING to do with protecting the wealth of the 99%. Nothing. Zero. And to pretend like people with less than a million dollars in liquid assets are "too dumb" or "inexperienced" to purchase something is beyond insulting. It has everything to do with creating a private market where the 1% can g…

The reason we don't let 99% of people buy shares of private companies has NOTHING to do with protecting the wealth of the 99%. Nothing. Zero. You seem pretty confident in your hypothesis. Have you gone back and looked at what drove the change in regulations? It's not like these regulations are passed with supporting evidence. The regulation was passed in 1933, right after the crash. Between protecting investors and "…

Comparing the light regulation of the past to the current strict regulation, sure the current regulation is better.

But legally anointing an "accredited investor" class based on their current financial resources clearly advantages the rich over the poor. There are other ways to protect investors without categorically denying opportunities for savvy, non-wealth individuals (and people who are currently wealthy also deserve protection from fraudsters).

Re: How Wall Street Middlemen Help Silicon Valley Employees Cash in Early

#52

Post by themagician »

refurb wrote: post #31
themagician wrote: post #23

Earlier quoted context omitted.

That analogy isn't about odds. It's about the why. The reason we don't let 99% of people buy shares of private companies has NOTHING to do with protecting the wealth of the 99%. Nothing. Zero. And to pretend like people with less than a million dollars in liquid assets are "too dumb" or "inexperienced" to purchase something is beyond insulting. It has everything to do with creating a private market where the 1% can g…

The reason we don't let 99% of people buy shares of private companies has NOTHING to do with protecting the wealth of the 99%. Nothing. Zero. You seem pretty confident in your hypothesis. Have you gone back and looked at what drove the change in regulations? It's not like these regulations are passed with supporting evidence. The regulation was passed in 1933, right after the crash. Between protecting investors and "…

We don't protect investors from penny stocks, which are far riskier. We "protect" investors from damn near nothing. There are some limits on day trading and options trading sure, but those start to get lifted at around $25k.

Investing in a private company that's about to go IPO is actually not that risky when compared to multitude of other investment instruments that are available.

The secondary market is private market for the 1%. That's literally what it is. Maybe that's not how it started or how it was originally sold, but that's what it is. And it's now institutionalized and part of the law.

The idea that it's about protection is just absurd. It's absurd. Are you telling me you are glad that the 1% is out there making sure that you can't invest in Facebook for $20/share? Protection? Really?

Re: How Wall Street Middlemen Help Silicon Valley Employees Cash in Early

#53

Post by refurb »

a_c_s wrote: post #51
refurb wrote: post #31

Earlier quoted context omitted.

The reason we don't let 99% of people buy shares of private companies has NOTHING to do with protecting the wealth of the 99%. Nothing. Zero. You seem pretty confident in your hypothesis. Have you gone back and looked at what drove the change in regulations? It's not like these regulations are passed with supporting evidence. The regulation was passed in 1933, right after the crash. Between protecting investors and "…

Comparing the light regulation of the past to the current strict regulation, sure the current regulation is better. But legally anointing an "accredited investor" class based on their current financial resources clearly advantages the rich over the poor. There are other ways to protect investors without categorically denying opportunities for savvy, non-wealth individuals (and people who are currently wealthy also de…

I'm not saying an advantage isn't given to the wealthy, I'm just challenging the idea that that was the driver for the regulation.

To be honest, the gov't is kind of stuck here. Let people make their own choices and they blame someone else. "I didn't know the mortgage rate was only a teaser!!"

At least with the credited investor regulations, if they lose money, nobody has sympathy for them.

Re: How Wall Street Middlemen Help Silicon Valley Employees Cash in Early

#54

Post by JoeAltmaier »

refurb wrote: post #31
themagician wrote: post #23

Earlier quoted context omitted.

That analogy isn't about odds. It's about the why. The reason we don't let 99% of people buy shares of private companies has NOTHING to do with protecting the wealth of the 99%. Nothing. Zero. And to pretend like people with less than a million dollars in liquid assets are "too dumb" or "inexperienced" to purchase something is beyond insulting. It has everything to do with creating a private market where the 1% can g…

The reason we don't let 99% of people buy shares of private companies has NOTHING to do with protecting the wealth of the 99%. Nothing. Zero. You seem pretty confident in your hypothesis. Have you gone back and looked at what drove the change in regulations? It's not like these regulations are passed with supporting evidence. The regulation was passed in 1933, right after the crash. Between protecting investors and "…

The crash was widely construed to be because of the ignorant public essentially betting on the stock market, with resulting instability. Wise, rich investors would invest and leave their money for years at a time.

The resulting rules changes can be revisionist-history interpreted as protecting the 99%. But remember at the time, the gilded age had passed; labor reforms were in place etc (Teddy Roosevelt, 1910s) and laws such as these were under fierce scrutiny for favoritism.

Still, today it does what it does regardless of the initial impetus. And what it does is prevent most people from playing most games.

Re: How Wall Street Middlemen Help Silicon Valley Employees Cash in Early

#55

Post by themagician »

Domenic_S wrote: post #28
themagician wrote: post #23

Earlier quoted context omitted.

That analogy isn't about odds. It's about the why. The reason we don't let 99% of people buy shares of private companies has NOTHING to do with protecting the wealth of the 99%. Nothing. Zero. And to pretend like people with less than a million dollars in liquid assets are "too dumb" or "inexperienced" to purchase something is beyond insulting. It has everything to do with creating a private market where the 1% can g…

> to pretend like people with less than a million dollars in liquid assets are "too dumb" or "inexperienced" to purchase something is beyond insulting. Really? Because a lot of that group said they "didn't know any better" and were "misled" when it came to bad mortgages during the crunch. Whether you believe them or not, that was their argument and it worked. There are entire industries based on exploiting people wit…

Yeah, lots of people do claim that. But we still let them do it. High risk, low reward investments are totally cool for everyone. We don't have a problem with the risk portion. It's only when the reward becomes huge that we have a problem.

I don't think most people realize how true the adages are, "the rich keep getting richer," or, "it takes money to make money," really are. People say it, and other people feel it's true, but then they can't point to anything tangible. But there it is. Current SEC regulation basically institutionalizes this.

Here is a financial opportunity that's actually not that complicated, which is no more risky than other available opporutinies, but we have actually made it the law such that, "Only the 1% may do this."

Re: How Wall Street Middlemen Help Silicon Valley Employees Cash in Early

#56

Post by paul »

ScottBurson wrote: post #11

So this is where Sarbanes-Oxley has gotten us: to where it's so painful to run a public company that companies put off their IPO much longer than they would have, so people figure out how to trade the stocks anyway -- but in doing that, they have to go on far less information than they would have had, pre-Sarbanes-Oxley, when the company would already be public. The law of unintended consequences is alive and well.

On the other hand, the .com bubble was driven in large part by the ability of VCs to flip junk onto naive retail investors.

The fact that venture investors now need to wait many years for an exit (and the startups can really only access institutional capital during that time) helps keep things a lot more grounded in my opinion (though I'm sure many will disagree).

Re: How Wall Street Middlemen Help Silicon Valley Employees Cash in Early

#57

Post by oh_sigh »

themagician wrote: post #52
refurb wrote: post #31

Earlier quoted context omitted.

The reason we don't let 99% of people buy shares of private companies has NOTHING to do with protecting the wealth of the 99%. Nothing. Zero. You seem pretty confident in your hypothesis. Have you gone back and looked at what drove the change in regulations? It's not like these regulations are passed with supporting evidence. The regulation was passed in 1933, right after the crash. Between protecting investors and "…

We don't protect investors from penny stocks, which are far riskier. We "protect" investors from damn near nothing. There are some limits on day trading and options trading sure, but those start to get lifted at around $25k. Investing in a private company that's about to go IPO is actually not that risky when compared to multitude of other investment instruments that are available. The secondary market is private mar…

Right...I wonder how the public would react to those "protections" if they were dropped a bit, but still out of reach for the average person. Let's say $100k in assets, not including your home and property. Now, about 15% of Americans have access to this pool. Do you think the other 85% is going to be happy about this? Right now, the way the regulations are set up, it seems like such a small minority of people have access, that it isn't worth worrying about. But $1M is really just an arbitrary number.

Re: How Wall Street Middlemen Help Silicon Valley Employees Cash in Early

#58

Post by Spooky23 »

rday wrote: post #19
themagician wrote: post #13

Earlier quoted context omitted.

"The opportunity is risky to be sure, only for educated investors as ready and able to lose money as to make money." That's bullshit. We let poor people gamble and they aren't "ready and able" to lose anything. The laws around accredited investing are a disgusting example of how the 1% legally entitle themselves to opportunities while excluding the other 99%.

I don't think the gambling analogy works here. You can't invest 5 dollars in a company 1000 times until you have no money left. Also gambling odds are heavily controlled. Could you imagine a pit boss telling you "Table 5's die have an unfair advantage to land on 7"? Conversely, people raising money tell you exactly why they will succeed and why they are a better choice than some other company. These people can be ver…

Gambling goes beyond table games. Pre-IPO startups are more like the propositions bet on at a sports book or racetrack.

Actually, there are a lot of parallels between a startup and a racehorse. If you evaluate a horse's past performance, trainer, position in the field, etc you can bend the odds. It's still gambling!

Re: How Wall Street Middlemen Help Silicon Valley Employees Cash in Early

#59

Post by gfodor »

paul wrote: post #56
ScottBurson wrote: post #11

So this is where Sarbanes-Oxley has gotten us: to where it's so painful to run a public company that companies put off their IPO much longer than they would have, so people figure out how to trade the stocks anyway -- but in doing that, they have to go on far less information than they would have had, pre-Sarbanes-Oxley, when the company would already be public. The law of unintended consequences is alive and well.

On the other hand, the .com bubble was driven in large part by the ability of VCs to flip junk onto naive retail investors. The fact that venture investors now need to wait many years for an exit (and the startups can really only access institutional capital during that time) helps keep things a lot more grounded in my opinion (though I'm sure many will disagree).

Don't worry, the SEC will eventually fully open the doors to retail investors investing in private equity. Imagine the bubble when the companies don't even have to disclose the bad news!

Re: How Wall Street Middlemen Help Silicon Valley Employees Cash in Early

#60

Post by gfodor »

refurb wrote: post #53
a_c_s wrote: post #51

Earlier quoted context omitted.

Comparing the light regulation of the past to the current strict regulation, sure the current regulation is better. But legally anointing an "accredited investor" class based on their current financial resources clearly advantages the rich over the poor. There are other ways to protect investors without categorically denying opportunities for savvy, non-wealth individuals (and people who are currently wealthy also de…

I'm not saying an advantage isn't given to the wealthy, I'm just challenging the idea that that was the driver for the regulation. To be honest, the gov't is kind of stuck here. Let people make their own choices and they blame someone else. "I didn't know the mortgage rate was only a teaser!!" At least with the credited investor regulations, if they lose money, nobody has sympathy for them.

Seriously, the same people who complain about "accredited investors" being a privilege of the 1% are also going to use the phrase "predatory lenders." So, which is it? Can people be tricked into bad deals or can't they?

I'm pretty sure if anyone could invest in private equity, overnight you'd see a flood of get-rich-quick ventures crop up and you'd see a lot of people lose everything.

I'm not sure if I think the current legal system is fair, but without acknowledging the huge amount of risk involved in changing it any argument against it is hard to take seriously.

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