9thdoctor Posted November 1, 2011 Share Posted November 1, 2011 Part of that legal/cost hurdle for a public stock offering is fraud prevention. Fraud is a lot more frequent in small-cap/micro-cap stocks than larger-cap ones (link). But I suppose in your fantasy world where anyone can sell stock to the general public on whatever terms they want, there wouldn't be any fraud.I’ve worked with companies that raised money by word of mouth, $50K here and $50K there. There are resulting S-Corp shares and Limited Partnership interests one can buy and then sell on the secondary market, but to get listed on NASDAQ or the NYSE you have to meet certain standards. There would be such standards whether the Government got involved or not. Part of how Bernie Madoff got away with his scheme for so long was the fact that he wasn’t subject to the rules imposed on mutual funds and such. Buyer beware, in either case. Link to comment Share on other sites More sharing options...
sjw Posted November 1, 2011 Share Posted November 1, 2011 There would be such standards whether the Government got involved or not.There would not be "such" standards, there'd be a wide variety of competing standards, ones that we'd have a hard time imagining given how shackled we are in this fascist setup.But yes, buyer would beware even more in the kind of system I'd offer, it wouldn't be "utopia", it'd be "learn to be responsible with your money." It's the same with the FDA -- it should not exist, and if it didn't, you'd have to be careful and responsible. Fraud would be illegal, but not stupidity.Shayne Link to comment Share on other sites More sharing options...
9thdoctor Posted November 1, 2011 Share Posted November 1, 2011 There would not be "such" standards, there'd be a wide variety of competing standards, ones that we'd have a hard time imagining given how shackled we are in this fascist setup.There already are a wide variety of competing standards. Aren’t we talking about market capitalization? To get on the NYSE you have to be big. Penny stocks can’t make it, so they have their own market. Beyond that, you can put an ad in the newspaper seeking investors in whatever…a restaurant franchise or barber shop. Such investments are highly illiquid, however, so investors demand high returns. They’re also inherently more risky, so investors again demand yet higher returns. And, if your investors don’t know you personally, soon you’ll have 20 bosses who don’t know your business but that you have to keep happy. The cost of private equity is very high, that’s life, that’s the real world. Link to comment Share on other sites More sharing options...
sjw Posted November 1, 2011 Share Posted November 1, 2011 Ninth,Can you do something exactly like this, but offer stock in the project?:http://www.kickstarter.com/My understanding of securities laws says it's illegal and/or prohibitively expensive.E.g., say I have an idea for a video game. I'm a well-known person who's trusted to be able to deliver, but have no funding whatsoever. I offer a basic idea and shares of stock for $45, plus a free copy of the game when it's done. If the game makes it big, you might get a hefty return. How can I set this up cheaply, without breaking any laws?Shayne Link to comment Share on other sites More sharing options...
sjw Posted November 1, 2011 Share Posted November 1, 2011 Evidently there is already a Quora answer to this, and the answer is no. Hello fascism:http://www.quora.com/Kickstarter/Could-you-use-Kickstarter-to-distribute-stockSo yeah, Bob and Merlin are full of, shall we politely say, "nonsense."Shayne Link to comment Share on other sites More sharing options...
Michael Stuart Kelly Posted November 1, 2011 Share Posted November 1, 2011 How can I set this up cheaply, without breaking any laws?Shayne,Venture capital.I don't know this field very much since my interest for my own projects lies in producing my stuff under my own steam, but venture capital is where good ideas go to happen in informatics.Here's an interview with a relatively young guy who does nothing but get money for others from venture capital firms (except for having written one of the best damn books on pitching proposals/deals currently on the market). His name is Oren Klaff. The interview is about his book, but he peppers it a lot with anecdotes of how and where he has raised tons of venture capital. This might give you some ideas or a direction to pursue.Use These Persuasion Tactics (Almost) Like Mind Control – with Oren Klaff on MixergyI'm sure you are smart enough to do the business plan and formalities--or learn them if you don't already know.And, maybe for seed money to get things in shape to present to a venture capitalist, there is crowdfunding like you already mentioned (the Kickstarter site--but there are others out there, too).Michael Link to comment Share on other sites More sharing options...
9thdoctor Posted November 1, 2011 Share Posted November 1, 2011 My understanding of securities laws says it's illegal and/or prohibitively expensive.E.g., say I have an idea for a video game. I'm a well-known person who's trusted to be able to deliver, but have no funding whatsoever. I offer a basic idea and shares of stock for $45, plus a free copy of the game when it's done. If the game makes it big, you might get a hefty return. How can I set this up cheaply, without breaking any laws?I’ve never heard of Kickstarter, and if you want professional advice you should expect to pay for it. There are people who specialize in helping companies “go public”, I don’t work in that area.I do recall, however, a software company that included a redeemable stock option, it came in the box when you bought whatever program it was. This was well over 10 years ago. As I remember, it was dismissed as a gimmick. This was when the dot com boom was in progress. Link to comment Share on other sites More sharing options...
bmacwilliam Posted November 1, 2011 Share Posted November 1, 2011 Evidently there is already a Quora answer to this, and the answer is no. Hello fascism:http://www.quora.com...istribute-stockSo yeah, Bob and Merlin are full of, shall we politely say, "nonsense."ShayneOnce again you're just plain wrong.From your link to a post:"There are some exceptions to these rules, ("friends and family shares"), but, generally, you are inviting a lot of legal headaches if you try this."This is incorrect. Why do I say this? Because I've done it - several times. Purchased and sold shares, in part and whole, in several small startups. You fail to understand these important points:1) As an investor, I can investigate and purchase shares in ANY small company I'd like as long as the owner agrees too of course. As a practical matter, I would always know the owner and operation well, because otherwise the investment would be foolishly risky. Investing in a start-up without being close (a 'friend') is just stupid.2) As a business owner, I pay to have a shareholder's agreement drawn up at the inception of the corporation and I can sell shares to anyone I please. Strange, but nobody from the other side of the country that knows nothing about my business has ever expressed dismay about all the government red tape preventing them from buying my stock. They don't know about it, they don't care, and they'd never invest in a million years.3) Your obsession with a 'public offering' prohibition is a non-starter. There is no market for this. The rules for the big markets are indeed required to minimize fraud, and yet there's still too much. 'Buyer beware' solves everything is extreme naivete. There basically is not enough information available for investors to make investment decisions on small companies unless they are very close to the source.4) Investment generally follows a logical and natural pattern.- The originator invests his time and money in a concept he believes in.- An angel investor generally needs to see this commitment (at a minimum) and also believe in the concept and person before he may invest- A bank likes to see these types of commitment and a track record (and collateral) before they offer debt.- A Venture cap operation will need to see some or all of the above before they invest- All of the above and more need to happen before they go public (and realistically before there is even a market)Remember, liquidity is almost always a problem with OTC securities. This is not the fascist evil government's fault. This is a natural outcome of limited demand.This little reality problem doesn't fit with your 'principles'...Bob Link to comment Share on other sites More sharing options...
9thdoctor Posted November 1, 2011 Share Posted November 1, 2011 Remember, liquidity is almost always a problem with OTC securities. This is not the fascist evil government's fault. This is a natural outcome of limited demand.The main motivation I’ve seen for selling limited partnership interests is the death of the investor. There is a market for it, but you’re going to be selling for a big discount. It calls to mind the warning they used to attach to CD’s: substantial penalty for early withdrawal. When I was in school there was a student club for finance majors, and they had a t-shirt that said something like “finance pro’s do it better” on the front, and had the “substantial penalty…” bit on the back. Anyway, pink sheets, look into them. http://en.wikipedia.org/wiki/Pink_sheetsOh, and another thing, to “go public” you’re going to need to be a C-Corp, which means double taxation (tax at the corporate level, then tax again on dividends at the shareholder level). Is that fascistic? Well, you won’t see me praising it! Link to comment Share on other sites More sharing options...
merjet Posted November 1, 2011 Share Posted November 1, 2011 All excellent points, Bob Mac. The nonsense-peddler here is Shayne. He exemplifies the adage "a little knowledge is a dangerous thing."1. A little reading on Kickstarter shows its purpose is not to issue stock, public or private. It is mainly a way for an independent filmmaker to raise some money. "Contributors are more like donors than investors, since they earn no return or equity, though they are promised rewards (a copy of the CD, dinner with the artist). If the project meets its goal, Kickstarter, a for-profit company, takes a 5 percent cut and the creator gets the rest" (link).2. "So far, the company has raised more than $21 million from nearly 240,000 backers for 2,443 films, according to co-founder Yancey Strickler. He says six films have crossed the $100,000 mark." That's an average of about $8,600 per film and $87.50 per backer. The most money raised on any project is $345,992. In contrast, a typical IPO is for a $100 million or more.3. Many small businesses are financed with privately-held stock (link). For such the business head can offer stock on whatever terms he wants. Success in raising the money, of course, depends on what other investors will accept. The requirements for publicly-traded stock that Shayne presumes are roadblocks for anyone are simply irrelevant for privately-issued stock.4. Venture capital is a more organized form of raising private equity capital. Typically funding is not a one-time event (link). Venture capitalists don't just finance, but offer business advice.I post this for readers that have a genuine interest in the topic, which doesn't include Shayne. It's clear that his modus operandi is to throw out less than half-baked arguments, rant and demean others. Link to comment Share on other sites More sharing options...
Selene Posted November 1, 2011 Share Posted November 1, 2011 Oh, and another thing, to “go public” you’re going to need to be a C-Corp, which means double taxation (tax at the corporate level, then tax again on dividends at the shareholder level). Is that fascistic? Well, you won’t see me praising it!Dennis:Out of curiosity, can an LLC go public?Adam Link to comment Share on other sites More sharing options...
sjw Posted November 1, 2011 Share Posted November 1, 2011 3) Your obsession with a 'public offering' prohibition is a non-starter. There is no market for this.Bob's whole rambling and misleading post was aimed at sneaking in this dishonest premise. There is no market? True. Why? Because it's illegal.Here's yet another example of a project funded on kickstarter. The investors would have obviously preferred stock, but instead are stuck with getting cheap trinkets. They still got $200K from the public:http://www.kickstarter.com/projects/196017994/diaspora-the-personally-controlled-do-it-all-distrI've also seen Valve Software talking about funding games by offering stock in them, but they couldn't figure out the legal aspects. They're already a big company, so even if they could figure it out, it wouldn't prove Bob and Merlin right, it's prove me right given that they've already spent a good deal of effort trying to figure out how to offer stock in games to the general public and haven't so far.Bob and Merlin are just morons who lack imagination about what is possible in a free market. Either that or they are closet fascists. In any case, they have no actual argument, so they use ad hominem and rambling verbiage instead.Shayne Link to comment Share on other sites More sharing options...
9thdoctor Posted November 1, 2011 Share Posted November 1, 2011 Oh, and another thing, to “go public” you’re going to need to be a C-Corp, which means double taxation (tax at the corporate level, then tax again on dividends at the shareholder level). Is that fascistic? Well, you won’t see me praising it!Dennis:Out of curiosity, can an LLC go public?AdamActually I don’t know if say, the NYSE requires you to be a C-Corp, what I know is that you can’t be an S-Corp because the number (and nature) of shareholders is limited by the tax rules. There are foreign companies on the NYSE, and they’re not necessarily going to be domestic C-Corps.Now, an LLC would have other problems. If you trade interests in an LLC, how would the passthroughs of tax info work? If you own it for a period of months that’s one thing, but if someone’s day trading membership interests as though they were stock shares I don’t see how it could work. I’m going to send you a K-1 covering a 10 minute time period? How am I even going to know that you ever owned it? Also there are events that trigger termination, like if there’s too much turnover in ownership within a year.Maybe this is just a failure of imagination on my part, but then again I’ve never seen an LLC “go public” in the sense we’re talking. Interests are marketable, but it’s just not like stocks. Link to comment Share on other sites More sharing options...
sjw Posted November 1, 2011 Share Posted November 1, 2011 A key problem with selling LLC stock to the public is that you can't create different classes of stock. So if (say) you want controlling shares vs. non-controlling shares (think Jobs getting kicked out of his own company), you can't do that.The whole system is one big frozen archaic blob of nonsense that has nothing whatsoever to do with the free market and everything to do with "one neck ready for one leash" fascism.Shayne Link to comment Share on other sites More sharing options...
9thdoctor Posted November 1, 2011 Share Posted November 1, 2011 A key problem with selling LLC stock to the public is that you can't create different classes of stock. So if (say) you want controlling shares vs. non-controlling shares (think Jobs getting kicked out of his own company), you can't do that.I think you’re mixing up LLC’s and S-Corps. LLC’s can have different classes of membership interest (at least in my state), S-Corps can only have one class of stock (that's a federal thing). Link to comment Share on other sites More sharing options...
sjw Posted November 1, 2011 Share Posted November 1, 2011 I think you're generally right Ninth, though I can't vouch for the rules in a particular state. (And it's nonsense that we're given these arbitrary models and told to choose from them; we shouldn't be limited to the creativity of bureaucrats' imaginations).Shayne Link to comment Share on other sites More sharing options...
bmacwilliam Posted November 1, 2011 Share Posted November 1, 2011 3) Your obsession with a 'public offering' prohibition is a non-starter. There is no market for this.Bob's whole rambling and misleading post was aimed at sneaking in this dishonest premise. There is no market? True. Why? Because it's illegal.Bob and Merlin are just morons who lack imagination about what is possible in a free market. Either that or they are closet fascists. In any case, they have no actual argument, so they use ad hominem and rambling verbiage instead.Notice how you cry about ad hominem after calling me a dishonest moron.However, your point that it is illegal only matters if:a) There is no principled justification for it.orb) It actually impairs viable legitimate economic activity.There is no significant legal barrier to seeking funds for, or investing in, small business - in the real world at least, and that's the bottom line. Your argument is like complaining that your rights are being violated because there's a 200km/h speed limit but your car can only go 100. We can argue that (a) is a problem and that in principle the law is a violation, but it's rather weak because there's no connection to reality. Wrong as it is, it does not impede your 'freedom' in any real way.In the small business example neither condition is met. We DO need financial laws and law enforcement and most of them are justified. Fine, probably not all. But secondly, the next largest market struggles with liquidity, so it is not logical to conclude that the legal status of the smaller market is why it doesn't exist. That doesn't make sense. It's pretty clear the legal status is a minor impediment to small business investment at worst. I know, I have lived both sides of this equation.Equity markets are like hockey games - players split up into teams but also working for themselves trying to win the game and reach personal goals too. Flood the ice with too many referees and really stupid rules and you have a poorly functioning market/game. Remove all the rules and referees and you have your "free market" but the entire game falls apart very quickly. Play the "game" with money, and the incentive to cheat is even greater. Free markets need referees and enforcement. Call me fascist, but speak to Madoff investors and see what they have to say.Bob Link to comment Share on other sites More sharing options...
sjw Posted November 1, 2011 Share Posted November 1, 2011 http://www.rockpapershotgun.com/2009/07/21/gabe-newell-suggests-public-funding-for-games/Question still stands: How can Gabe legally pursue his dream here in the current setup?Note to Merlin & Bob: Regarding you stamping your feet and pouting "but there's no market for that": Shut the hell up. It's not for you to decide.Shayne Link to comment Share on other sites More sharing options...
merjet Posted November 1, 2011 Share Posted November 1, 2011 Question still stands: How can Gabe legally pursue his dream here in the current setup?He might learn something from Electronic Arts, a video game maker, publicly-traded, and member of the S&P 500. He could even try to sell out to EA. Another Shayne effusion goes down the drain. Link to comment Share on other sites More sharing options...
bmacwilliam Posted November 1, 2011 Share Posted November 1, 2011 http://www.rockpaper...ding-for-games/Question still stands: How can Gabe legally pursue his dream here in the current setup?Note to Merlin & Bob: Regarding you stamping your feet and pouting "but there's no market for that": Shut the hell up. It's not for you to decide.ShayneYou are correct, it is not for me to decide and I never said it was. You made the claim that the market doesn't exist because it's illegal. This is false and misleading.Bob Link to comment Share on other sites More sharing options...
Brant Gaede Posted November 1, 2011 Share Posted November 1, 2011 Ideology never trumps empiricism and must be flexible enough to allow for seeming exceptions--to a point--until more data at least are available. There is no need to rush to purity, clutching it tight, right out of the gate. Let people who know what they are on the ground talking about have their say. You don't want to be the guy telling the pilot of an airplane that man will never fly. This now untellable blatant falsehood can be repeated for less obvious things like raising money for small business ventures. The first huge advance in medicine came from autopsies. Then smallpox vaccinations. Then the germ theory of disease and public sanitation. Then antibiotics. Ideology only worked by embracing scientific empiricism and scientific empiricism only worked by embracing that embracement: One, two, one, two, one . . . .--Brant Link to comment Share on other sites More sharing options...
sjw Posted November 1, 2011 Share Posted November 1, 2011 Question still stands: How can Gabe legally pursue his dream here in the current setup?He might learn something from Electronic Arts, a video game maker, publicly-traded, and member of the S&P 500. He could even try to sell out to EA. Another Shayne effusion goes down the drain. I don't need to answer this, the owner of Valve already has:http://www.computerandvideogames.com/262497/valve-refuses-to-sell-out-on-stock-market/Stop your idiotic troll yammering.Shayne Link to comment Share on other sites More sharing options...
sjw Posted November 1, 2011 Share Posted November 1, 2011 You are correct, it is not for me to decide and I never said it was. You made the claim that the market doesn't exist because it's illegal. This is false and misleading.BobIt is illegal. Not even a rich company like Valve can figure a way around it.My question still stands. Show Valve how to solve their problem without breaking the law and without sacrificing sovereignty over their work. You can't show this, because you're wrong. It is illegal for Valve to do it the way they want, so they don't do it. And yet you yammer on.Are you a moron, a fascist apologist, or a troll, or all three together?Shayne Link to comment Share on other sites More sharing options...
merjet Posted November 1, 2011 Share Posted November 1, 2011 I don't need to answer this, the owner of Valve already has:http://www.computera...n-stock-market/Thanks for providing me the fuel to set your argument ablaze. The link includes: "Valve has revealed that it has no interest in cashing in on its unique position by going public - because it couldn't handle the interference from shareholders." You first falsely claim that Valve can't go public because it's illegal. But this says Value has no desire to go public. In other words, it's a red herring and completely irrelevant to your first claim. Moreover, you have yet to tell us what specific law you are whining about. Link to comment Share on other sites More sharing options...
sjw Posted November 1, 2011 Share Posted November 1, 2011 Thanks for providing me the fuel to set your argument ablaze. The link includes: "Valve has revealed that it has no interest in cashing in on its unique position by going public - because it couldn't handle the interference from shareholders." You first falsely claim that Valve can't go public because it's illegal. But this says Value has no desire to go public. In other words, it's a red herring and completely irrelevant to your first claim. Moreover, you have yet to tell us what specific law you are whining about.Valve wants to offer stock without yielding sovereignty. It wants to create a kind of share in their company that does not subject them to creative interference. THAT is illegal. And YOU are complete and total moron for failing to discern what the subject is here by now.Could it really be that simple? That you aren't trolling me at all, but are actually just a "special" child? Your mommy shouldn't let you on the internet methinks.Shayne Link to comment Share on other sites More sharing options...
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