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The Stock Market Loophole That Screws the Little Guy
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The Stock Market Loophole That Screws the Little Guy

Felix Salmon
Wired, 2018
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Editorial Rating

9

Qualities

  • Controversial
  • Innovative

Recommendation

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.

Take-Aways

  • The public stock market strives to put all investors on the same level through regulation and enforced transparency.  
  • Well-connected investors have been staking a claim earlier than the vast majority of investors by buying shares from insiders in start-ups before they go public. 
  • The lack of transparency in these transactions thwarts price discovery, a major ingredient in an efficient stock market. 

About the Author

Felix Salmon is a financial journalist, blogger and host of the Slate Money podcast.

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