Twilio, Asana to List on Long Term Stock Exchange
wsj.com
wsj.com
> To list on LTSE in August, Twilio and Asana are agreeing to a slate of commitments such as aligning executive and board compensation with long-term performance; taking customers and employees into account; and explaining how the company’s board oversees its long-term strategy. These commitments must be concrete policies that can be monitored by LTSE.
If such agreements are broken what’s the punishment, other than presumably being dislisted? If there are none it seems like an empty platitude given that you can already buy both on the “regular” stock exchange.
Is daytrading prohibited? If not seems like it’s still bound by the same short term nonsense. I’d be impressed if you can only buy and sell on the LTSE once a year. Money being put where the mouth is and all that.
In terms of the requirements on trading that you mention, a requirement like that would violate current SEC rules about trading. But remember that companies are the metaphorical "central bank" of their own currency and can do all kinds of things that would reward those investors who truly are committed for the long-term. We don't have anything to announce in this area at this time, but I hope to be able to say more some day.
(last time the question came up: https://news.ycombinator.com/item?id=19886420 )
I will say that I expect companies will also have opportunities to innovate in this area when it comes to their own stock, though I do think it will take a while as the industry is relatively conservative about things like this.
I am intrigued by your offering, and for a retail trader holding LTSE stocks could be a better investment than aggressively day traded markets (especially if day trading were to be banned etc.), and might offer a strong alternative to regular retail stocks which are a bit too much of a rollercoaster ride, so I don't think I want to play that game much, but I also don't have a trading account at some huge institution.
Will you push to ensure retail investers are able casually join in?
I do expect over time listed companies will develop special rewards and benefits for long-term investors. Our rules are designed to make sure that any such programs are equally available to retail investors to casually join in, as you say
If you aren’t implementing any exchange-level mechanisms, why does this need to be an exchange at all? Why not just create a template for corporate bylaws that you can certify, like a B-Corp? An LT-Corp, if you will.
People today think of exchanges as just platforms to facilitate trading, but historically this is not how they used to be seen. Exchanges have always had a dual role, as avatars of corporate governance as well as sources of liquidity. We are trying to bring that balance back into the financial infrastructure of capital markets.
LTSE looked like BS before, now I'm convinced.
https://ltse.com/blog/introducing-the-long-term-stock-exchan...
It seems the companies on LTSE are not bound to be traded only there so it doesn't seem like the trading would mostly go through it, since it's bound to have less liquidity than traditional exchanges.
Quick skim and comparing with the OP article, the only concrete takeaway I get is shareholders that hold shares longer potentially have more voting power in your system? Good for founders, potentially (and ironically) bad for the company in the longterm.
I don't have to labor the point on this site that a few successful exits had founder CEO's that needed to be removed by investors/shareholders.
Although an earlier version of our proposal did have a voting-rights mechanism, as part of a one-size-fits-all prescription, we ultimately decided against it. Personally, I was hoping to offer "long-term voting" as a principled compromise between standard governance and dual-class shares. But in the interim, dual-class shares have basically won in the market. I'm still hopeful as an industry we will be able to find better solutions in the future
(I've read that on average, companies run by founders tend to do better over the long term. I'm having trouble pulling up the source though; best I can find right now is the book 100 Baggers, quoting a study saying "there was often a large shareholder or an entrepreneurial founder involved.")
Or is most of the support for the LTSE accomplished on the company side, and at listing time?
First off, you're right that the most important place for support is via companies. Ultimately, that's what matters. But you'd be surprised how much voice people have in influencing companies. For example, if you're an employee, I can tell you first hand how closely CEO's and executive teams monitor (for example) what gets asked about at all-hands meetings.
Shareholders matter too. Companies want to know what their investors think and many of them have whole "investor relations" departments whose job is, in part, to relay investor sentiment to the rest of the company.
In terms of trading, yes, you can specify what exchange your shares trade on. Almost every major broker is a member of LTSE and can route orders to the exchange. As the customer, you're in charge of where your orders get routed, and you're welcome to specify a specific venue. Not every broker supports this right in their web UI, although I've heard that Interactive Brokers (IBKR) does.
If you've been following the news about controversies such as "pay for order flow" and such, you might make a connection here. Most retail customers don't specify where their order should be routed and as a result, they lend their voice to many of these industry practices. Because LTSE is not focused on maximizing trading volume, things are a little different on our platform. If you route to LTSE, you can be sure that no intermediary is getting paid for your transaction, and LTSE does not take a trading fee either.
As to whether traffic on LTSE helps, I think it does lend a little bit of credibility. If you take the time to tell your broker this is what you want, they will probably notice.
Thanks for the thoughtful question!
(Disclosure: I work on the sell-side, but don't have a Series 7. Certainly, for vanilla orders, Reg NMS requires your broker to route your order for best price. If you're specifying the routing, though, I'll leave it to someone with a Series 7 to explain which Reg NMS protections still apply.)
Personally I'm not really sold on the idea of LTSE. I mean it sounds good I guess, but governance of a public company doesn't start with the venues it is able to be traded on. It starts with the company, or at least with our regulatory bodies (lol imagine that)
Make trading expensive and it will become less voluminous and short term. Allow companies to exclusively list where trading is purposely expensive.
It is often taken as a given that this is true, despite the many very long term successful public companies.
I think it's interesting that you use the word "despite" here, since of course it's those very companies that provide the data for this area of research.
I don't have time to pull links to papers right now, but there are some referenced in our (rather old now) whitepaper:
https://longtermstockexchange.com/static/principals_for_lt_s...
as well as our original application to the SEC: https://www.sec.gov/rules/sro/ltse/2019/34-86327.pdf
Some of my favorite research shows what happens to pairwise-matched companies where one went public and one stayed private. The effects are totally predictable.
That sounds like an interesting read. How can I find it?
Jonathon Feit Jonathon.Feit@beyondlucid.com
So far, we have taken the view that each company has to design its long-term program around its own philosophy and approach. I don't know if it would really work to adopt a one-size-fits-all rule like this, even if I personally liked it.
We will have to see how the concept of benefit corporations evolves. So far, it seems that a number of companies that truly exist for the benefit of humanity have chosen not to organize themselves under that framework. As long as this is true, I'd be wary of excluding them from LTSE.
I'm curious as to specific differences wrt to other exchanges, your website doesn't really do a direct comparison. For example, do you require holders to hold a certain amount of time before being able to sell, are there limits around frequency of trading, how do you make money, etc.
Or is it more around including companies that think long term? In which case, I think that's also doable on normal exchanges (for example, Amazon is famous for long term thinking and has done well on normal exchanges too).
The SEC's rules around trading (today) really prohibit a lot of the "obvious" ideas people have had about how to slow down trading. We have some stuff in the works here, but it won't be public for a while.
That said, we have adopted a construct that we call the "Very Simple Market" that eliminates a number of trading "features" such as hidden liquidity. We think this makes it a more conducive environment for the longest-term investors to trade. We also have a business model that is much more aligned with the long-term investors and companies than most incumbents. We don't seek to maximize our trading volume, so that requires us to make money by helping our customers run their businesses better.
As we say in SV, if you're not the customer, you're the product. This applies to issuers as well.
On your latter point, you've got it right. We don't think we have an exclusive on good ideas, and there's definitely examples where talented founders have found ways to build for the long-term in spite of the existing market structures.
But when was the last time you heard a CEO say that they were able to think long-term _because_ of the markets in stead of in spite? That to me is a key difference
If i understand your reference to "hidden liquidity" correctly, you have simple order types and when compared to other venues.
Wouldn't it be better for price discovery, if all US equities were traded in one continuous limit order book instead of across a dozen venues, each with its own funky order types and quirks?
if you agree, i cannot help but think about this xkcd https://xkcd.com/927/
The sad reality is that because of these issues (and, to be fair, others) most trading is moving off lit exchanges altogether. For some companies we are talking about 80% or more of the volume, and this would be even higher if not for the requirement that day-open and close auctions happen on the "home" exchange.
We have made a proposal to the SEC to bring this off-exchange activity back into the light of the protected quote, but nothing to report at this time about how, when, or if this will come to fruition: https://longtermstockexchange.com/resources/docs/LTSE_Exempt...
In terms of trading, we don't currently have any rules of the sort you mention. Under today's regulatory framework, this would be hard (but not impossible) to do. We hope to see more work in this area, but nothing to announce at this time.
Your listing principles page (https://longtermstockexchange.com/listings/principles/) is interesting in that there's a lot I agree with (like compensation policy) but then some other principles (like "The company’s approach to diversity and inclusion" or "The company’s impact on the environment and its community") are vague enough that I am not sure what it implies. Is it fair to consider LTSE a "progressive" financial institution?
Why weren’t legacy companies given grandfathered pricing?
What about Amazon that operated on losses for many consecutive years?
>> their only goal is maximizing shareholder value in the short term
and mentioned Amazon making a loss. You're right that Amazon could credibly be described as "maximizing shareholder value", but I think the question of whether they maximize shareholder value in the short term is more subtle.
You could do some jiujitsu and say "long-term value maximization is equivalent to short-term value maximization under reasonable assumptions", but I think the discussion upthread was about a more prosaic concept of short-termism that is related to profits. They wouldn't have qualified their statement with "in the short term" if they'd meant "expected NPV" :-).
Actual long term performance requires more than PR, pitching, and posturing. It requires actually following through and reaching the expected profits.
Wefunder or Republic or another such service would create a special purpose LLC to be the shareholder of record (or SAFE/noteholder or whatever) on your cap table.
What you're describing however is the way AngelList works.
The reason for this is mainly because the Reg CF terms prohibit crowdfunding investment vehicles (such as funds or SPVs).
(Source: I am former CSO of Republic)
Recently though I bought shares in a private company through wefunder and the docs specify I'll be a unitholder in an SPV LLC set up by wefunder that will own the stock, so I wonder if this prohibition changed with the $5m cap change?
So the CEOs of Twilio and Asana invested in this exchange then convinced their board to list on it. I'm sure they're not just interested for personal gain though.
Sounds like a good thing.
At the same time, founder supervoting is falling out of favor. This neatly backdoors to the same result—founders (and institutional investors, who can invest through a long-holding front end and then allocate exposure to that on the back end) gaining outsized influence over individual investors (who aren’t coördinated) and hedge funds. Seems like a lot of collateral damage.
I have to check the comps, but Monday.com was valued more than Asana just like two weeks ago and far more before the pumping began. How much better could Monday.com’s financials be
Can someone provide the simple overview of (a) how LTSE is different, (b) what the listed company pro/cons are and (c) what are the investor pro/cons
> To list on LTSE in August, Twilio and Asana are agreeing to a slate of commitments such as aligning executive and board compensation with long-term performance; taking customers and employees into account; and explaining how the company’s board oversees its long-term strategy. These commitments must be concrete policies that can be monitored by LTSE.
I imagine what's next is more of the same: solutions to do with different ways of communicating. Perhaps no-code/low-code variants to many of their offerings, much like what Stripe is doing (powerful technical layer, but also very business friendly introductory solutions)