If You Had a $100MM Dollars…

Aug 27th, 2007 | Filed under: Industry

..you’d be rich. (the obvious as stated by Canadian pop-ironists The Barenaked Ladies)

And with the impending launch of Portal Market, you will also qualify for entry into your very own, exclusive stock market. That’s right; there is a new stock market reserved for those individuals and institutions with at least $100 million in assets. And you thought getting into that club on Saturday night was tough. No amount of hair gel and cleavage will part these velvet ropes! Come to think of it, Paris Hilton might be the only one who could get into both. (I hope you recognize and appreciate the difficulty of working in a reference to her on a financial blog. Thank you.)

On the plus side, Portal is a way for large private companies to raise capital outside of the public markets- an attractive proposition to the onerous, costly, and short-term thinking of what it means to be a public company. From a recent article:

The private market…shields companies from regulation and
from wild swings in their share prices that are caused by a temporary
drop in earnings or a bad rumor.

This is a great thing. I am all for the private sector to have as many options as possible to secure capital to invest in projects and companies that will someday employ thousands and add to the competitiveness of our country. Indeed, ready access to investors is what makes the entrepreneurial climate the best in the world. And, needless to say, I am all for people getting wealthy from the fruits of their labor.

However, there is something a little off-putting by having an entire exclusive market that is closed to the average investor. It furthers the gap between the ultra-rich and the mainstream investor whose access to sophisticated financial instruments seem to make a playing field that was once fair, into something stacked against the majority of its players.

The rise of private money has created a new class of powerbrokers on
Wall Street who have enriched themselves even as they have provided
billions of investment dollars to companies in all kinds of industries.
But the trend is causing a backlash among working-class Americans who
generally are shut out from investing directly in those circles, said
Colin Blaydon, director of the Center for Private Equity and
Entrepreneurship.

"While there has been great value creation in
the American economy, it has not gone to the large bulk of American
citizens," Blaydon said. "It has gone to the very top slice — and I
mean the very top slice — with no increase of real incomes of American
workers, including the middle-class management class. And that is
something that people sense in their guts. They know they are not
better off, and yet there are a handful of people who are
extraordinarily better off."

Indeed what WAS so great about investing in the public markets WAS the fact that it was so egalitarian- wealth could be created by being good regardless of how much money you initially started out with. After all Warren Buffet was not Warren Buffet before he started investing in companies. It was the act of his being an incredibly astute picker of great companies at value prices that earned him his billions. He earned it. And we all respect him for it while also believing that the markets can do the same for us. Optimism is what makes the markets work, not exclusivity.

The Cake blog will continue to report on this growing trend and, as always, we hope Cake can help tilt the playing field a bit more back in favor to the mainstream investor through better information sharing, communication and collaboration…just like the wealthy guys do.

And that’s hot.