Goldman’s GSTrUE Has a Responsibility to Public Companies

Posted on May 25, 2007. Filed under: Investing, U.S. Equities |

Goldman Sach’s innovative private market for firms that want access to capital markets without the regulatory burdens of the NYSE sounds like a winning idea from a company that is accustomed to having winning ideas.

My first take on this idea is that I think it’s good on the face of it for U.S. investors. The reason is that it may take some of the volitility out of our “public” equity markets. My other reaction is that public companies that trade in these private stocks ought to be required to disclose their investments to their public shareholders. If they don’t have to, then investors will never know how exposed their investments are to this highly volitile market. By the same token, these private firms ought to be limited to holding investments in other private stocks. This won’t happen, but I don’t think that it’s right for private stocks to create volitility in the public market without any of the regulations that public companies face.

The most important asset our financial markets have is their insistence that information be available to everyone, not just a priviledged few. Goldman’s private market participants profit handsomely from the public markets. There is no question that trades on this exchange will impact stock prices on the NYSE. Regulators ought to look at this thing very carefully.

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    --Jack Germond

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