It’s easy to get used to our surroundings and prevailing conventions. So much so, that we do not seem to notice that the equity market lost its original function and turned into a non-scientific and highly unnatural bogus arrangement. It seems it has gradually been hijacked to benefit those advisors and consultants that call themselves “the market”. I must confess to also having been a bit of a parasite in this respect.
At the outset entrepreneurs met investors met in one-off arrangements. This worked well when a voyage to east India had to be financed, but is such an arrangement also suitable for long-term ventures and on-going enterprises? Maybe not. The equity markets have turned into stock exchanges and are now digital and global animals. Along the way, the markets switched its focus from financing small entrepreneurial endeavors to the trading of shares in large corporations, entities that usually don’t even need financing.
Today the financial markets work really well up to -and including – the IPO. These so called pre-IPO markets benefit the company and its stakeholders. After the IPO however, the markets seem to primarily exist to stuff the pockets of everyone except the companies and their investors.
Cold hard facts
To support their cause, the hijackers have developed elaborate financial theories. The highly quantitative nature of these theories makes their conclusions difficult to question. Even if these theories more than often contradict some of the most accepted science, their numerical outcomes have the advantage of looking like cold hard facts. Who can argue with that?
Fact of the matter is that the only ones that can create and maintain a functioning market are the business organisations companies themselves. A first step is to get their stakeholders more engaged is to start communicating their strategic intent.
A clear vision for the future is so much more engaging than useless historic financials.