Some spolu investors will want to divest their spolu holdings:
1) Some spolus could run into cash flow problems — and selling their spolu holdings might be a good way to climb out a bad financial situation.
2) The spolu may wish to finance an expansion by selling its current spolu holdings.
3) Some spolus will fail, which incurs liquidation.
4) Individual investors may want to sell spolu shares to buy something else (like a house).
5) Individual investors may pass away; the estate will want to sell these shares.
6) Individual investors may wish to sell/give shares to specific individuals or charities.
7) Governments who invested into a spolu for a certain societal objective may want to divest their holdings.
Having a spolu exchange will allow buyers and sellers to find each other.
In essence, the first spolu will need to set up The Spolu Exchange for this purpose.
Mechanisms for the Spolu Exchange
There are four ways for the spolu exchange to effect transactions.
First, buyers and sellers can come to some agreement outside the Spolu Exchange. When they find that agreement, they can use the Exchange to formalize their agreement is a cost-effective way.
Second, investors who have an interest in investing in a particular spolu can express their interest in buying shares. They will put up a posting to buy shares for a certain price. If a spolu share owner likes the share price offered, the trade will be conducted between the two parties.
Third, if the spolu share owner believes a higher share price is possible than what the above investors are offering, those shares can be listed on the Spolu Exchange. The shares will be on auction for two weeks. Spolu investors can inspect all the financial information about the spolu and make an appropriate bid. At the end of the auction, the highest bid buys the spolu from the owner.
Fourth, the seller can place a reserve bid on his shares. If this reserve bid is not reached, the seller can place the shares on the exchange again, maybe with a lower reserve bid.
So spolu share owners has several mechanisms to ensure a reasonable value for their shares. I’m quite sure that most spolu shares will be sold at a reasonable price — without all the tools of arbitrage so promoted by the financial industry.
The New Arbitrage
Today’s stock exchanges are designed for unfettered transactions between buyers and sellers. The advocates of such systems believe that a market of many buyers and sellers reduce the “arbitrage” of such transactions. This means the price of most transactions is indicative of true value and fair to past, present, and future buyers and sellers.
But, in my opinion, this arbitrage process, including its many derivative products, is more about funneling more wealth to already wealthy people than providing an accurate value of shares bought and sold. In other words, arbitrage is overrated (in my opinion).
The Spolu Exchange will have a different arbitrage. I believe the Spolu Exchange buy-sell mechanisms will provide at least 80% of the true value to the sellers. Because most spolu investors should have been looking at a five-year time frame when they made their investment, they should have already recovered much of their original investment. They still have the shares, with a market value which the Spolu Exchange will determine. And since these investors are mostly looking to get cash for things outside of re-investing, they will be not so annoyed with a perceived loss.
I recommend that the Spolu Exchange use fees per transaction to discourage short-term investments. There should be a small fee for placing shares on the exchange, a small fee for placing a bid, and a bigger fee for effecting the legal transaction. These fees will make “day-trading” unprofitable.
In other words, the Spolu Exchange is looking for investors with a long-term outlook. They buy their investment and stay with it for many years.
So I estimate the volume of spolu share transactions will be about 1% of what today’s stock exchanges move. This does not mean the Spolu Exchange will not find fair and reasonable value for sellers.
Remember that any blue-chip company on a modern stock exchange can change value by 3% on any given day without any news, good or bad, about the company. To me, this is another sign that arbitrage is overrated. We can reduce trading volume and still find a reasonable price for shares.
The Public Offering
Entrepreneurs are always looking to put their ideas, vision, and energy into the marketplace. They will join the spolu network. They will use the Spolu Exchange to help raise capital, putting their prospectus for investors to inspect.
Some established spolus will want to expand operations — and would prefer to fund this expansion by selling more shares than finding lenders. They would post their offering on the Spolu Exchange.
While both of these spolus would list their proposals on the Spolu Exchange, they might also have to “hustle” outside the Exchange to find that capital. When agreement is reached, the Exchange will legalize the transaction for both parties — for a small fee.
Published on Medium 2024
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