The Long Term Stock Exchange was recently approved by the SEC and could change how tech startups go public. The LTSE could bring big chances to the stock market. (Stock Photo)
Every year we hear about the latest promising tech startup. By the end of the year, we hear of another one shutting down. If only these companies had enough time to develop their products, without worrying about profit growth. They may get that chance.
U.S. regulators recently approved a new stock exchange that will help tech startups in a huge way. The Long-Term Stock Exchange (LTSE) is a Silicon Valley-based platform for tech startups that want to go public while taking their time to create products and services. This will take the pressure off of new companies to constantly deliver positive numbers, which may shift their goals from being innovative to seeking profit.
The new stock exchange was proposed to the SEC in November 2018 by Eric Ries, a technology entrepreneur, author, and startup adviser who has been working on the idea for years. With the help of venture capitalists, he raised $19 million to get his project up and running. Before it received the greenlight, several rules were created to help encourage companies to focus on long term innovation instead of company earnings. Some of these include limiting executive bonuses, requiring more disclosure for milestones, and rewarding long-term shareholders with more voting power.
The arrival of the LTSE marks the only stock exchange in California and the first in Silicon Valley since the Pacific Exchange in San Francisco shut down at the end of the dot com era. It’s unknown how well it will compare with the larger, better resourced New York Stock and Exchange and Nasdaq, but things are looking good so far. Several companies have signed letter of intent to list on the new exchange when it goes live, but Ries doesn’t plan on naming them.
If the LTSE is a success, it could greatly change how those in the tech field go public. Most companies wait 10 years or more before filing for an IPO, reducing their chances for dramatic growth. The new exchange could shorten this period while giving companies the time and money they need to develop their ideas. Though it would mean high-risk companies would go public, it would give other promising startups a fighting chance, instead of having them shut down after a year.
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