4 ms·

Wealth taxes are one solution. But in my opinion the only way to get extremely wealthy is to own a company that goes public. Personally I'm starting to think

Wealth taxes are one solution. But in my opinion the only way to get extremely wealthy is to own a company that goes public. Personally I'm starting to think that when a company goes public there should be limits on what percentage of that company an individual can hold. Bezos being able to control 11.1% of Amazon given it's size seems a little ridiculous. The entire point of the stock market or "going public" was to allow public ownership and benefit of these massive behemouths (whether they should even grow that large in the first place is another discussion). But when one person owns such a large percentage it really tips the scales. I don't know how you'd solve this. Forced pay out to the owners when a stock goes public? There are probably negatives I am not thinking of. But it just seems like public markets let companies grow to levels so large that having an individual have such a large share doesn't make sense anymore.

giantg2 6y ago
There are plenty of companies that are private that have large ownership shares. The point of going public is to raise capital buy relinquishing some ownership. Owners don't want to give their shares unless they have to. If there were mandates to sell out of a company that you started and at a stage before you realized the gains on the capital you raised, it would incentivize companies to stay private and find their funding through private channels.
- nightski 6y ago
  I agree with what you are saying. But by relinquishing ownership they are gaining the ability to receive far more capital than they would without the public market from what I understand. If this is reinvested in the business it allows said company to grow to levels that would not be possible as a privately owned company. Even the largest privately owned company, Cargill, is making interesting restructuring moves that point to it possibly going public. I'm actually fine with companies staying private because I fundamentally believe this seriously restricts their growth. I do not think a company like Amazon, Facebook, Microsoft, or Google (20% of the S&P 500) would be able to reach the size they did without access to going public. Of course I fully admit I could be wrong and would love to hear interesting arguments why.
  - giantg2 6y ago
    I think the growth part can be the case in some instances, but not all. I don't think it's a fundamental restriction, but maybe more common in the private world. The voting rights don't necessarily come with every share, nor are they evenly distributed. So you could raise capital through non-voting shares and retain the ownership. Another thing to point out is that the size of the company based on the market cap and share of S&P500 doesn't really have an influence on the capital they raised by issuing shares. You have companies that have 100s of billion in market cap that only raised one or two billion through stock offerings. Private companies are also able to raise that sort of money too, like SpaceX recently did. With this in mind, how does staying private restrict growth? Even if you required a buyout of the majority or minority (10%+) owners, you still wouldn't solve the problem. In fact, you could create a bigger funding issue because you aren't using the capital raised for expanding the business but for paying out. For example, you might want to raise $100M, but if the buyout requires the owners to sell a substantial postion, then you might need to raise $400M. https://www.zdnet.com/article/facebook-and-google-had-one-thing-in-common-raise-capital-without-raising-oversight/ https://www.zdnet.com/article/facebook-and-google-had-one-th...
    - deleted 6y ago
      [deleted]
prionassembly 6y ago
I don't necessarily disagree with what you said. This is because I don't know what you're arguing for. Wealth taxes are one solution for what? For the anger people feel when they realize billionaires exist, absolutely. To improve the lot of the very poor, maybe (but an argument needs to be made here). These discussions assume too much about the end goal of society.
- nightski 6y ago
  Sorry if my point was unclear. I'm arguing that not only does the stock market allow companies to grow too large (stifling innovation and competition), but also allowing large ownership to become too wealthy at the expense of society in general. If a company goes public I think there should be some consequences to that since it allows for this insane growth. Such as a more even diversification of ownership among the general public (aka investors on the public stock market). This spreads the wealth so to speak in a much more straightforward fashion than taxing the rich which leads to all the money flowing into the government.

giantg2 6y ago

There are plenty of companies that are private that have large ownership shares. The point of going public is to raise capital buy relinquishing some ownership. Owners don't want to give their shares unless they have to. If there were mandates to sell out of a company that you started and at a stage before you realized the gains on the capital you raised, it would incentivize companies to stay private and find their funding through private channels.

nightski 6y ago
I agree with what you are saying. But by relinquishing ownership they are gaining the ability to receive far more capital than they would without the public market from what I understand. If this is reinvested in the business it allows said company to grow to levels that would not be possible as a privately owned company. Even the largest privately owned company, Cargill, is making interesting restructuring moves that point to it possibly going public. I'm actually fine with companies staying private because I fundamentally believe this seriously restricts their growth. I do not think a company like Amazon, Facebook, Microsoft, or Google (20% of the S&P 500) would be able to reach the size they did without access to going public. Of course I fully admit I could be wrong and would love to hear interesting arguments why.
- giantg2 6y ago
  I think the growth part can be the case in some instances, but not all. I don't think it's a fundamental restriction, but maybe more common in the private world. The voting rights don't necessarily come with every share, nor are they evenly distributed. So you could raise capital through non-voting shares and retain the ownership. Another thing to point out is that the size of the company based on the market cap and share of S&P500 doesn't really have an influence on the capital they raised by issuing shares. You have companies that have 100s of billion in market cap that only raised one or two billion through stock offerings. Private companies are also able to raise that sort of money too, like SpaceX recently did. With this in mind, how does staying private restrict growth? Even if you required a buyout of the majority or minority (10%+) owners, you still wouldn't solve the problem. In fact, you could create a bigger funding issue because you aren't using the capital raised for expanding the business but for paying out. For example, you might want to raise $100M, but if the buyout requires the owners to sell a substantial postion, then you might need to raise $400M. https://www.zdnet.com/article/facebook-and-google-had-one-thing-in-common-raise-capital-without-raising-oversight/ https://www.zdnet.com/article/facebook-and-google-had-one-th...
  - deleted 6y ago
    [deleted]

prionassembly 6y ago

I don't necessarily disagree with what you said. This is because I don't know what you're arguing for. Wealth taxes are one solution for what? For the anger people feel when they realize billionaires exist, absolutely. To improve the lot of the very poor, maybe (but an argument needs to be made here). These discussions assume too much about the end goal of society.

nightski 6y ago
Sorry if my point was unclear. I'm arguing that not only does the stock market allow companies to grow too large (stifling innovation and competition), but also allowing large ownership to become too wealthy at the expense of society in general. If a company goes public I think there should be some consequences to that since it allows for this insane growth. Such as a more even diversification of ownership among the general public (aka investors on the public stock market). This spreads the wealth so to speak in a much more straightforward fashion than taxing the rich which leads to all the money flowing into the government.