Mr Horizontal
Gallente
Brotherhood of Wolves
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Posted - 2007.11.24 06:30:00 -
[1]
Right, we're getting somewhere now. With some flesh on the bone, we have a bone to pick! Yay!
I can now see where you're coming from Ufl, you want to create a secure exchange with underwritten aspects. This is commendable. However you can't underwrite the shares directly in this way...
What you're trying to do is underpin the ISK as a currency with Veldspar as gold did to the dollar (not the case anymore btw), which a central bank's problem. The problem is a central bank has absolutely nothing to do with a stock exchange! The second problem with a central bank underwritten concept is you need to underwrite the whole EVE Economy. At a count this is ~90 trillion ISK. Now, sorry, I don't think even Chribba's got 30 billion units of Veldspar to be equivalent to the economy! More to the point, who has the ISK to buy the stuff if you need to liquidate to cover the meltdown of a share?
Second, when someone floats a company on an exchange and issues shares, what they're asking for is to borrow your money and mine in exchange for part ownership of the company. This means the investor inherently needs to think: "Yeah this dude has a brain and if I give him 100 he'll give me 130 back". So an IPO commences, and the dance with the sharks begins. If the CEO has stood up to the criticism of the sharks, then they get their ISK invested in their corp.
So you see, by having those shares underwritten by veld, the whole concept of 'borrowing' falls flat on it's face. An IPO is basically a huge loan contract with multiple lenders and thereonin is a massive debt management exercise. Hence their obligations to dividend etc. The CEO is creating 'value' in his corp being able to promise the returns. So it is always inherently risky, and inherently a problem that can't really be underwritten.
To give an example here, it's like going to a bank to get a mortgage, but saying to the bank, "I don't have the money, but I have a deed, bricks, land, tiles, fittings and windows of my house, can I pay for it with that?" What's the point of getting the mortgage?
Now in the parentheses above, I said the dollar isn't underwritten by gold any more. Nor is the British Pound. Instead, you won't believe this, but they're both underwritten by shares!
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meh. |