While the Facebook Initial Public Offering (IPO) is now the “big” financial gambling news, who benefits from IPOs? According to the Los Angeles Times (February 3, 2012) “too few companies are going public, and they’re waiting too long to do so. Researchers say that start-up companies have been responsible for 100 percent of the job growth in the United States since the late 1970s, and that the vast majority of the jobs created by new companies arrived after their IPOs. Those statistics make a powerful argument that IPOs can serve the public’s interests as well as those of company executives and venture capitalists.”
Start-up companies generally get their money from professional venture investors (the initial “smart” money) and later through IPO stock market investors (the gamblers). But in reality, once a risky start-up achieves the level of projected sustainability and profitability to merit an IPO public offering, the company’s employees and public are excluded and are regulated to the sidelines of the Wall Street gambling casino, with Wall Street brokerage firms that handle the deals parceling out shares to hedge funds, mutual funds and some ultra-wealthy individuals that generate big trading commissions. Small “retail” investors are left with no choice but to try to buy shares on the first day of trading. Of course, the “bet” is that the stock value on day one will soar and the investors will be able to sell at a much higher price for a capital gain. This is the game of those who have money to invest. The end result continues to further concentrate ownership and create wealth and income disparities.
This is were there is a corrective opportunity to set up credit mechanisms to insure that the employees and public can acquire shares in profitable companies or companies scrutinized to have profit potential that represent reasoned security and sustainability using the mechanism of risk insurance. Such risk could be taken by commercial insurers, backed by a new government corporation, the Capital Diffusion Reinsurance Corporation, through which the loans could be guaranteed. The policy goal should be to broaden ownership of productive capital ownership represented by the growth assets of the new companies so that company employees and other non-employees are empowered to acquire the new stock assets with the future earnings generated by the investment. This would enable employees to earn a second income through their capital worker ownership shares, and over time build a viable capital estate.
Insurance is key to the success of a broadened productive capital ownership policy. In any investment there are risks of a possible eventuality that the venture may not deliver on its projected claims of growth and profitability or may fail. The principal of insurance is that most will succeed. Thus, insurance can facilitate economic growth that otherwise would not be possible and simultaneously broaden productive capital ownership among the 99 percent who now do not own.
