What will determine the value of any spolu share?
To answer this question, I will create a hypothetical investment scenario. An investor has only two choices. He can invest into a 2% term deposit at his bank. Or he can purchase shares in a spolu that have historically paid $3 per share. This spolu is stable, so it’s safe to assume this trend is likely to continue.
A basic financial calculation suggests that this share is worth about $150 ($150 x 2% = $3). This assumes a risk-free investment. But spolus are never risk-free, so some discount is warranted. Let’s say that many astute spolu investors would be willing to pay $125 for this share. For sure $175 would not make much sense; the term deposit in the bank offers a better return, with no risk. The historical per-share profit distribution will determine much of the value of any spolu share.
The spolu exchange will also have its speculators. They are looking for good deals for their long-term investments. If our example’s spolu share is on the auction and current bid is $70, one speculator would realize this spolu is undervalued. He would put a bid of $80. Maybe he might get lucky and actually purchase this share at this price. But more likely, another speculator is going to bid a little more. The competing speculators will bring the value closer to $125 within a few days of being listed on the Exchange. The rest of the auction will be to find investors willing to pay a premium.
Some of the premium investors will be investors who try to predict the future. They will go beyond the basic financial calculation — and apply economic analyses to see which spolus are likely increase their profit distribution with that future. These investors will be willing to pay more for these shares.
Spolus enacting on their re-investment obligation may be looking for specific spolus to invest in. They might be willing to pay a premium to get these shares.
Employees might want to invest into their employers.
Some spolus will have a great rapport with the community, which could create a premium demand.
All these premium investors are good for the sellers. No one is forced to buy spolu shares that are overpriced.
Spolu shares that cannot attract premium investors might be a sign of a spolu that is not doing well. Going back to our hypothetical spolu, if speculators are paying $100 for its shares — and no new bids are coming in, that price might be too much.
Lastly, mutual funds specializing in spolu investments should be allowed on the exchange. Investors who don’t have the means to build a diversified portfolio (to manage risk) can put their modest spolu investments with a mutual fund.
By having speculators, basic investors, premium investors, and mutual funds, sellers should get a reasonable price for their spolu shares. The two-week auction is not a hardship to sell spolu assets. The Spolu Exchange will find a reasonably good value for the sellers, but without all the drama and bustle of a modern stock exchange.
Published on Medium 2024
