I wonder what this policy would do to short-selling. That seems to be Musk’s pet peeve.
Short sellers are every company’s pet peeve. 😎
You ask an incredibly astute and intriguing question, @lidja .
I think Musk would be quite happy with the additional costs inflicted on a short seller with the Long Term Stock Exchange (LTSE).
Normally on a stock exchange, every share of a company is worth the same. So when a short seller borrows stock from John Smith, sells it, buys it back for less and then “returns” the borrowed stock to John Smith, Smith could care less that he now owns someone else’s shares as long as he still owns the same number of shares.
On the LTSE, each share becomes more valuable to the owner the longer they hold it. So a short seller should pay a premium to borrow and sell shares held for several years by John Smith. Why? Because the short seller can only replace them with shares that will have zero years ownership accrued to Smith.
In practice, I expect daily trading of a portion of each company on the LTSE. But as many of the startups on the exchange will be money-losing for several years, there’s an incentive for founders and original investors to hold on to their shares at least until profitability. Consequently, it’s an open question if there will be enough volume availble to make it worth a seller’s time to short. So it could provide a few more years of breathing room and long-term focus for the listed companies.
Hmm, I think Musk would be mighty happy to have Tesla listed on the LTSE.