Not so long ago, private companies used bank loans, self-funding or venture capital to finance their growth before they went public or another firm acquired them. Now, however, a growing number of well-heeled private buyers are scooping up shares in start-ups from insiders in hopes of making a killing when the companies go public. Financial journalist Felix Salmon explores these speculative transactions, which cut off the public from participating in a business’s early growth stages and give a small handful of investors a big head start. getAbstract recommends this enlightening article to investors concerned about inequality of opportunity in the stock market.
In this summary, you will learn
- How private purchases of common stock from insiders are benefiting a small group of investors but eroding price discovery,
- Why public market stock transactions are a more egalitarian form of investment, and
- Why private buyer transactions may not be good for markets.
About the Author
Felix Salmon is a financial journalist, blogger and host of the Slate Money podcast.