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A few years ago, I invested in a small private company. I could call the CEO and he could tell me all his problems and prospects. I couldn't trade the stock ver
by T_S_ 16y ago
A few years ago, I invested in a small private company. I could call the CEO and he could tell me all his problems and prospects. I couldn't trade the stock very easily but I knew how the company was doing.
Then it went public. Suddenly the access to the CEO ended and the only information I got was from a 10Q. The company changed strategy to one that I didn't like, and I never got a good explanation.
Ironic that public = opaque, while private = transparent.
Our regulations are too much aimed at promoting liquidity and not at promoting correct valuations. We would be better off if investors were paid to make their horses run faster rather than switching horses in mid-race all the time. But they can't do this without real transparency.
- sbov 16y agoI'm not well versed in stock/securities laws, but I would imagine it would have to do with this: http://en.wikipedia.org/wiki/Insider_trading http://en.wikipedia.org/wiki/Insider_trading The CEO couldn't possibly take personal calls from every investor after going public. I don't feel particularly bad that someone can't get privileged information from the company that wouldn't be available to other investors. These regulations are for fairness.
- T_S_ 16y agoYou are correct that the CEO cannot favor investors due to SEC regulation and simple fairness. However, the issue raised is that companies use these regs as an excuse to draw the curtains and provide less information on the whole. This is bad for economic decision making on the whole. For example, it leads to greater volatility and securities prices that don't track value. It also places managers into a kind of priesthood with privileged access to information. Abuses ensue.