tag:blogger.com,1999:blog-5154389358831836369.post2133543666190489364..comments2024-03-29T02:09:24.633-04:00Comments on The Slack Wire: The Capitalist Wants an Exit, Facebook EditionJW Masonhttp://www.blogger.com/profile/10664452827447313845noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-5154389358831836369.post-7500461873637370662012-02-06T03:02:04.240-05:002012-02-06T03:02:04.240-05:00"Historically (in my simplistic understanding..."Historically (in my simplistic understanding), financial markets were intended to allocate capital from where there was an excess supply to to where it was needed. "<br /><br />My simplistic understanding is that the stock market doesn't play this role hardly at all. When you buy stock in a company, the company gets absolutely nothing from you -- every penny goes to another shareholder, none of is used by the company. There is an indirect sense in which the VCs and IPO buyers participate because they expect to be able to sell at a good price, and if they can sell at a good price it is because those buyers also expect to make money, and so on, so the fact that people are buying/making money on stock long after IPO was anticipated by those who actually invested in the company and their prediction of future stock activity was why they invested, but shareholders do not directly contribute to their companies post-IPO.Eric Lhttps://www.blogger.com/profile/17688525347746547529noreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-25651742870088389822012-02-05T08:51:48.850-05:002012-02-05T08:51:48.850-05:00To play devil's advocate: as Zuckerberg said, ...To play devil's advocate: as Zuckerberg said, his goal is to make the equity liquid. Isn't this a prerequisite to allocating "scarce savings to the most promising investments"?abb1noreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-76211510420236643072012-02-05T01:43:01.070-05:002012-02-05T01:43:01.070-05:00Just to be clear, I'm not mainly making a norm...Just to be clear, I'm not mainly making a normative claim here. I'm not saying there's something wrong with the desire for liquidity, just that it's not the way the role of stock market is normally presented.<br /><br />(Now in fact, I do have objections -- big ones! -- to this way of organizing things. But that's not what this particular post is about.)JW Masonhttps://www.blogger.com/profile/10664452827447313845noreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-27840338352997772232012-02-04T14:15:00.933-05:002012-02-04T14:15:00.933-05:00I enjoy your blog and the way it makes me think. ...I enjoy your blog and the way it makes me think. This post got me thinking about whether the change in the purpose of financial markets for firms like Facebook is a bad thing.<br /><br />Historically (in my simplistic understanding), financial markets were intended to allocate capital from where there was an excess supply to to where it was needed. Now, for certain firms, financial markets serve the purpose of disgorging cash. Is this a conflict or simply an evolution in the relationship between certain firms and their markets (business and financial)?<br /><br />When large sums a capital were required to fund certain businesses, markets developed to fund large fishing ships in Amsterdam or to enable the British to set up colonies or to enable the US to build large factories, railroads and steel mills. <br /><br />During this era, large amounts of capital and large numbers of people were required to produce fish, commodities and automobiles which these firms sold to consumers for cash. Some of that cash was then, presumably, returned to the shareholders.<br /><br />However, the types of business and how some of them them generate the revenue changed. Especially in developed countries. If you are writing software or designing furniture (think Ikea, which is private) or creating entertainment; you do not need large amounts of capital or very many people. Equally, the way you generate the revenue has changed. Google doesn't charge me for search, neither Adam Carolla nor the NFL charge me to download their podcasts and Facebook doesn't charge me to create a profile. <br /><br />For all these types of businesses, the way they generate revenue from their business market has entirely changed.<br /><br />So, if the business markets' relationship to these firm has changed, why shouldn't their relationship to the financial markets change?Andrew Meyerhttps://www.blogger.com/profile/13950859437400162668noreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-72093683848246994092012-02-03T21:24:52.884-05:002012-02-03T21:24:52.884-05:00Thing is, it seems like this (media, digital, tech...Thing is, it seems like this (media, digital, tech) sector of the economy --- while almost certainly overvalued --- is the part of american capitalism that is actually working, no?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-78328642215013380732012-02-03T21:20:41.143-05:002012-02-03T21:20:41.143-05:00As far as I know, nothing prevents a company from ...As far as I know, nothing prevents a company from IPOing without raising cash, just selling existing shares. Of course it's in the interest of Wall Street to maximize the size of the offering since they take a cut.<br /><br />It's quite understandable that venture funds want "out" since Facebook has passed well beyond the venture stage.Maxnoreply@blogger.com