[Video Prophecy] The Outsider Trading Scandal
Today, I’d like to switch gears. I want to talk about one thing: the outsider trading scandal.
I discuss this topic a lot and it was even featured in a previous Video Prophecy. To see my original thoughts on this you can click on the image below.
Keep scrolling to read more about my thoughts on this…
Onward and upward with the “Outsider Trading Scandal,” whereby the Securities
and Exchange Commission prohibits investment in anything you know about.
Since wealth is essentially knowledge, regulated information flows can stop wealth creation
in its tracks.
Blocking public issues of stock is the pettifoggery of Sarbanes Oxley double accounting rules and Fair Disclosure Act information bans on normal communication. Going public became a festival of lawyers and litigation. Insiders cannot even speak specifically about their companies without elaborate and expensive counsel. The result is only insiders know anything much and an omerta prevails on the first amendment.
Thus, the initial public offering (IPO) route is available only for multi-billion dollar, lawyer-rich deals such as Airbnb and Uber.
The result has been the collapse of smaller tech initial public offerings, the rise of leviathan conglomerates such as Google’s “Alphabet” and ultimately a more than 50% shrinkage in 20 years of the number of listed US public companies. There are three times more IPOs in Communist China than under the administrative state of free-market America.
However, it is hard to keep US entrepreneurs down. So now we have an outbreak of Special
Purpose Acquisition Companies (SPACs).
These strange beasts circumvent the IPO circus by collecting a choir of venture capitalists, angels and other certified private investors, who join in an echoing “shell.” No information leaks out of this vessel until a reverse merger with an entrepreneurial company, hopefully a multibillion unicorn, which receives the funds, captures the symbol, and lists on NASDAQ or other large exchange.
Alternatively, ventures that want to get a public valuation but do not need to raise money in the process can do a “direct listing.” Most prominent are music streaming Spotify and Peter Thiel’s Palantir, the security colossus.
I have several companies involved in various stages of this process, including some described in detail in Life After Google. I hope to introduce my subscribers to several in coming months.
Editor, Gilder’s Daily Prophecy