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I'm actually in favor of this. I've long held that there should be public liquidity in all companies over a certain valuation and the company should not be all

I'm actually in favor of this. I've long held that there should be public liquidity in all companies over a certain valuation and the company should not be allowed to bar you from selling the stock (though it could retain right to beat any pending offers) It's asinine that companies are allowed to treat equity pay as pay, and IRS can tax it as realized (AMT), but the worker does not in fact have any instrument with which to pay the bill. Edit: Also this is a really smart tweet IMO Give yourself a salary that pays for your wealth tax obligations. You don't have to sell anything. https://twitter.com/macrofacet/status/1453487461989076997 https://twitter.com/macrofacet/status/1453487461989076997 The valuation would grow slower due to burn rate, but the ownership % would not change.

DLTADragonHawk 5y ago
I think it is a smart way to handle it and it would work for some CEO/founders however, some founders operate as board members that still influence much of the direction and operation without the same possibilities for pay rate increases to cover the gains. I think this could work under specific ownership scenarios but, for high p/e ratio companies this will likely requires ownership sales.
- grayfaced 5y ago
  It would likely increase pressure for stocks to pay dividends at a rate that covers taxes on the gains. Which would probably be a good thing.
dsizzle 5y ago
He could also himself shares with super-voting power, like what Facebook and Google have done.
- DennisP 5y ago
  Is it possible to do that after taking outside investment? I always assumed share classes like that had to be set up at the beginning.
  - mardifoufs 5y ago
    Almost everything is possible you manage to get the other shareholders to agree. That might happen when some early investors sometimes want the founder to have more control especially before going public. The theory is that you'd rather have a founder you invested on in the first place steering the company than let your generic wallstreet shareholder without a vision(tm) take over a unicorn still full of promise. Sometimes the bet pays off, very very well. Take for example Musk. You can say whatever about him, but it's extremely clear he has a vision, and does pretty much anything to get there. I'm not sure tesla or spacex would've survived 2018 with someone else at the helm or if a shareholder revolt happened. Just by that metric he is already worth dozens of billions to the rest of the shareholders. Zuck is also a good example of investors trading off votes for a more wall st. independant, steadier long term eadership. Now keep in mind those are exceptions. Having supervoting shares orbmultiple classes of shareholders is very often not a good thing and usually leads to less value being generated. Accountability to shareholders is usually good and very important to ensure sane corporate governance. Which is why CEOs and founders absolutely love having ever less powerful shareholders and we end up in situations like now where even the crappiest IPO has absurdly overgeared supervoting classes. Who doesn't want to buy in a deeply in debt, cash burning ipo with very questionable growth who's founder has a perpetual 80% of the votes?
  - dsizzle 5y ago
    Yes, it's possible: Google, for instance, did it not only after taking outside investment, but after it went public (in 2014, 10 years after it went public) https://www.investopedia.com/ask/answers/052615/whats-difference-between-googles-goog-and-googl-stock-tickers.asp https://www.investopedia.com/ask/answers/052615/whats-differ...
- quickthrowman 5y ago
  Companies don’t do this anymore because S&P and other index creators will refuse to add your company to their indexes if you have multiple share classes. It’s much better to be part of an index than to retain founder control, for shareholders. https://www.ft.com/content/993e4c11-8729-3168-a280-69e1d400b1bc https://www.ft.com/content/993e4c11-8729-3168-a280-69e1d400b...
  - dannyw 5y ago
    Plenty of IPOs this year had dual class shares (~20% I believe). Founders are often billionaires; money is now measured in log terms, but control is a boolean. If they already have control, they'll want to keep that control. Investors (VC, etc) have made 20x or more on their investment already and no one is going to go on a fight with successful founders, for a variety of reasons but primarily, they don't care how a company performs in the long run because their fund has already sold their stake and closed already.
  - dsizzle 5y ago
    The price boost from being added to the S&P is temporary and small (~5%) https://www.investopedia.com/terms/s/spphenomenon.asp https://www.investopedia.com/terms/s/spphenomenon.asp The person controlling the company potentially has a much greater and longer lasting influence on the stock price! Epic isn't going to be part of the S&P when it's private anyway, so obviously that's not a top concern for Sweeney.
lavezza 5y ago
Somehow I think Elon giving himself a multi-billion dollar salary to cover a jump in Tesla stock would upset a lot of people.
- cosmotic 5y ago
  I'd be in favor of this I think. It might force Elon, Tesla, or the shareholders to address the elephant in the room: Teslas market cap vs their revenue. Teslas market cap is 1030m on 31.5m of revenue. GM is 79m on revenue of 122.5m. That's 50x the market cap per revenue.
  - gtCameron 5y ago
    How would they “address” that? It’s outside of their control
  - maerF0x0 5y ago
    Revenue is an instantaneous metric of a company where as Market Value is a reflection of sentiment integrated over time and relatively compared to competing options for capital (such as other stocks, bonds, even present vs future purchases if inflation is material). They will always be quite disjoint when viewed with an single/small number of revenue data points.
  - ralph84 5y ago
    How exactly would you propose Tesla address it? Put out a press release that says "you people are paying too much for our stock, stop it"?
    - bjtitus 5y ago
      Already tried: https://twitter.com/elonmusk/status/1256239815256797184 https://twitter.com/elonmusk/status/1256239815256797184
  - young_unixer 5y ago
    If a company is doing tons of R&D, and everything suggests that that R&D will give huge dividends in the future, then it seems perfectly normal for such a company to have a high market-cap/revenue ratio. If having too big of a market cap relative to revenue is wrong, then you're basically saying that companies should not invest too much in their future, just use their money to sell as much as possible right now. You know who else has extremely high ratios of mktcap/revenue? Pharmaceutical companies trying to cure diseases that have no available cure. Is it wrong to try to cure those diseases?
TedShiller 5y ago
I assume you’ve never founded a successful company
- bpodgursky 5y ago
  [flagged]
- threeseed 5y ago
  This comment adds absolutely nothing to the discussion. Is there some specific critique you have of what OP has said ?
  - TedShiller 5y ago
    It’s like saying “I think all music rock stars could improve their music by doing X.” That statement could be interesting if you’re a rockstar. If not, then not so much.
    - setpatchaddress 5y ago
      That doesn't make any sense -- something that applies to "all music rock stars" would have to come from a mastering engineer or someone at that level and even then it wouldn't be universally applicable.
- whateveracct 5y ago
  few have at the relevant magnitude
fallingknife 5y ago
That's ridiculous. Tesla's market value gain since it went public is around $1T. The aggregate profits since then are at most a couple billion and may even be a loss. Paying out a salary to cover the gains is impossible.
refurb 5y ago
Why do you think this requires public liquidity?

DLTADragonHawk 5y ago

I think it is a smart way to handle it and it would work for some CEO/founders however, some founders operate as board members that still influence much of the direction and operation without the same possibilities for pay rate increases to cover the gains. I think this could work under specific ownership scenarios but, for high p/e ratio companies this will likely requires ownership sales.

grayfaced 5y ago
It would likely increase pressure for stocks to pay dividends at a rate that covers taxes on the gains. Which would probably be a good thing.

dsizzle 5y ago

He could also himself shares with super-voting power, like what Facebook and Google have done.

DennisP 5y ago
Is it possible to do that after taking outside investment? I always assumed share classes like that had to be set up at the beginning.
- mardifoufs 5y ago
  Almost everything is possible you manage to get the other shareholders to agree. That might happen when some early investors sometimes want the founder to have more control especially before going public. The theory is that you'd rather have a founder you invested on in the first place steering the company than let your generic wallstreet shareholder without a vision(tm) take over a unicorn still full of promise. Sometimes the bet pays off, very very well. Take for example Musk. You can say whatever about him, but it's extremely clear he has a vision, and does pretty much anything to get there. I'm not sure tesla or spacex would've survived 2018 with someone else at the helm or if a shareholder revolt happened. Just by that metric he is already worth dozens of billions to the rest of the shareholders. Zuck is also a good example of investors trading off votes for a more wall st. independant, steadier long term eadership. Now keep in mind those are exceptions. Having supervoting shares orbmultiple classes of shareholders is very often not a good thing and usually leads to less value being generated. Accountability to shareholders is usually good and very important to ensure sane corporate governance. Which is why CEOs and founders absolutely love having ever less powerful shareholders and we end up in situations like now where even the crappiest IPO has absurdly overgeared supervoting classes. Who doesn't want to buy in a deeply in debt, cash burning ipo with very questionable growth who's founder has a perpetual 80% of the votes?
- dsizzle 5y ago
  Yes, it's possible: Google, for instance, did it not only after taking outside investment, but after it went public (in 2014, 10 years after it went public) https://www.investopedia.com/ask/answers/052615/whats-difference-between-googles-goog-and-googl-stock-tickers.asp https://www.investopedia.com/ask/answers/052615/whats-differ...
quickthrowman 5y ago
Companies don’t do this anymore because S&P and other index creators will refuse to add your company to their indexes if you have multiple share classes. It’s much better to be part of an index than to retain founder control, for shareholders. https://www.ft.com/content/993e4c11-8729-3168-a280-69e1d400b1bc https://www.ft.com/content/993e4c11-8729-3168-a280-69e1d400b...
- dannyw 5y ago
  Plenty of IPOs this year had dual class shares (~20% I believe). Founders are often billionaires; money is now measured in log terms, but control is a boolean. If they already have control, they'll want to keep that control. Investors (VC, etc) have made 20x or more on their investment already and no one is going to go on a fight with successful founders, for a variety of reasons but primarily, they don't care how a company performs in the long run because their fund has already sold their stake and closed already.
- dsizzle 5y ago
  The price boost from being added to the S&P is temporary and small (~5%) https://www.investopedia.com/terms/s/spphenomenon.asp https://www.investopedia.com/terms/s/spphenomenon.asp The person controlling the company potentially has a much greater and longer lasting influence on the stock price! Epic isn't going to be part of the S&P when it's private anyway, so obviously that's not a top concern for Sweeney.

lavezza 5y ago

Somehow I think Elon giving himself a multi-billion dollar salary to cover a jump in Tesla stock would upset a lot of people.

cosmotic 5y ago
I'd be in favor of this I think. It might force Elon, Tesla, or the shareholders to address the elephant in the room: Teslas market cap vs their revenue. Teslas market cap is 1030m on 31.5m of revenue. GM is 79m on revenue of 122.5m. That's 50x the market cap per revenue.
- gtCameron 5y ago
  How would they “address” that? It’s outside of their control
- maerF0x0 5y ago
  Revenue is an instantaneous metric of a company where as Market Value is a reflection of sentiment integrated over time and relatively compared to competing options for capital (such as other stocks, bonds, even present vs future purchases if inflation is material). They will always be quite disjoint when viewed with an single/small number of revenue data points.
- ralph84 5y ago
  How exactly would you propose Tesla address it? Put out a press release that says "you people are paying too much for our stock, stop it"?
  - bjtitus 5y ago
    Already tried: https://twitter.com/elonmusk/status/1256239815256797184 https://twitter.com/elonmusk/status/1256239815256797184
- young_unixer 5y ago
  If a company is doing tons of R&D, and everything suggests that that R&D will give huge dividends in the future, then it seems perfectly normal for such a company to have a high market-cap/revenue ratio. If having too big of a market cap relative to revenue is wrong, then you're basically saying that companies should not invest too much in their future, just use their money to sell as much as possible right now. You know who else has extremely high ratios of mktcap/revenue? Pharmaceutical companies trying to cure diseases that have no available cure. Is it wrong to try to cure those diseases?

TedShiller 5y ago

I assume you’ve never founded a successful company

bpodgursky 5y ago
[flagged]
threeseed 5y ago
This comment adds absolutely nothing to the discussion. Is there some specific critique you have of what OP has said ?
- TedShiller 5y ago
  It’s like saying “I think all music rock stars could improve their music by doing X.” That statement could be interesting if you’re a rockstar. If not, then not so much.
  - setpatchaddress 5y ago
    That doesn't make any sense -- something that applies to "all music rock stars" would have to come from a mastering engineer or someone at that level and even then it wouldn't be universally applicable.
whateveracct 5y ago
few have at the relevant magnitude

fallingknife 5y ago

That's ridiculous. Tesla's market value gain since it went public is around $1T. The aggregate profits since then are at most a couple billion and may even be a loss. Paying out a salary to cover the gains is impossible.

refurb 5y ago

Why do you think this requires public liquidity?