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> Up to and including making the trade of private equity illegal. How would this even work? "Private equity" just means shares in non-public companies. How wou

by gruez 2y ago

> Up to and including making the trade of private equity illegal. How would this even work? "Private equity" just means shares in non-public companies. How would private companies raise capital, which are often are done in the form of trading equity for cash? Should a startup be forced to go public just to raise their series A? Even outside silicon valley or wall st, even something as benign as a neighborhood coffee shop is technically "private equity". Should such business owners be barred from selling their businesses to anyone? >Having a private black market for equity is bad for everyone other than insiders. I understand the justification for banning private equity for individual investors on the basis that they can't be expected to discern scams from non-scams (hence the concept of "accredited investors"), but it's far less clear why institutions can't be trusted to do their own due diligence before engaging in a trade.

cogman10 2y ago
> How would this even work? A good question that I don't have a good answer for. I don't have anything really against individual investors taking a risk on a private business. However, I have big issues with there being a large market for these risks to be traded, swapped, and financialized. That's where I see most of the danger, it isn't the first hand selling of equity but rather having a literal market for such equity. I shouldn't be able to short kim's coffee shop. > it's far less clear why institutions can't be trusted to do their own due diligence before engaging in a trade. Because they, frankly, aren't trustworthy. How much money by VC firms has been dumped into obvious ponzi schemes such as FTX? The issue I have with institutions is they aren't concerned with due diligence, they are concerned with turning a profit. That means they are more than happy to turn a blind eye to obvious company problems if they think they can get in and out before a meltdown (IE, pump and dump).
- Ekaros 2y ago
  The whole rewarding model for these institutions reads like pure scam if you apply any cynicism. Make money win or lose. Make even more money when "win" even if all that win is purely on paper. And if you lose just roll the stuff under some new name that happened to win. Record looks good. Even if other records were losers... At least with publicly traded stocks you can have substantial market depth so valuations can be "real". But move to private equity and well even that little goes away...
anon373839 2y ago
> How would this even work? "Private equity" just means shares in non-public companies. How would private companies raise capital, which are often are done in the form of trading equity for cash? I think we could start by eliminating the carried interest loophole. This would eliminate an artificial incentive to engage in PE “work” that really shouldn’t exist in the first place. Of course, in the current environment with fraudsters being pardoned, that’s a fantasy.
SpicyLemonZest 2y ago
> Should a startup be forced to go public just to raise their series A? Maybe? Going public just means that you have to report certain information about your financials to the SEC. I get why companies don't want to do that, but if VC investments are going to start being traded as part of 401k plans I'm not sure why the public shouldn't get to see that information. It seems feasible and reasonable to maintain an exception for what you might call "true" private equity, where specific people buy and sell specific companies rather than trading them in liquid markets.

by gruez 2y ago

cogman10 2y ago

> How would this even work? A good question that I don't have a good answer for. I don't have anything really against individual investors taking a risk on a private business. However, I have big issues with there being a large market for these risks to be traded, swapped, and financialized. That's where I see most of the danger, it isn't the first hand selling of equity but rather having a literal market for such equity. I shouldn't be able to short kim's coffee shop. > it's far less clear why institutions can't be trusted to do their own due diligence before engaging in a trade. Because they, frankly, aren't trustworthy. How much money by VC firms has been dumped into obvious ponzi schemes such as FTX? The issue I have with institutions is they aren't concerned with due diligence, they are concerned with turning a profit. That means they are more than happy to turn a blind eye to obvious company problems if they think they can get in and out before a meltdown (IE, pump and dump).

Ekaros 2y ago
The whole rewarding model for these institutions reads like pure scam if you apply any cynicism. Make money win or lose. Make even more money when "win" even if all that win is purely on paper. And if you lose just roll the stuff under some new name that happened to win. Record looks good. Even if other records were losers... At least with publicly traded stocks you can have substantial market depth so valuations can be "real". But move to private equity and well even that little goes away...

anon373839 2y ago

> How would this even work? "Private equity" just means shares in non-public companies. How would private companies raise capital, which are often are done in the form of trading equity for cash? I think we could start by eliminating the carried interest loophole. This would eliminate an artificial incentive to engage in PE “work” that really shouldn’t exist in the first place. Of course, in the current environment with fraudsters being pardoned, that’s a fantasy.

SpicyLemonZest 2y ago

> Should a startup be forced to go public just to raise their series A? Maybe? Going public just means that you have to report certain information about your financials to the SEC. I get why companies don't want to do that, but if VC investments are going to start being traded as part of 401k plans I'm not sure why the public shouldn't get to see that information. It seems feasible and reasonable to maintain an exception for what you might call "true" private equity, where specific people buy and sell specific companies rather than trading them in liquid markets.