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Sharespost

Sharespost

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Found an interesting article from the Associated Press while I was watching Gene Simmons Family Jewels last night (fun episode, Shannon on painkillers buying Ginsu knives and Gene trying to figure out how to stimulate the economy -- by ringing the opening bell).

The article says Scott Painter and business partner Greg Brogger have started a group called SharesPost.

This vehicle was launched publicly in June and allows Painter to try and sell shares in companies he helped found, which includes car pricing start-up TrueCar.com.

However, Painter wants to go further, backing an idea allowing insiders to sell shares in companies before their initial public offering (IPO).

A couple of the companies Painter is interested in include Twitter and LinkedIn (sites you may be familiar with).This is an interesting concept, as it allows shareholders an "alternative way" to trade shares in what some believe are "hot" start-ups (like Facebook).

In fact, this allows people to invest in these start-ups and receive money without waiting for an IPO.

The article argues that such an idea is good and could help stimulate the economy.

Selling shares on a private exchange can help investors find funds in order to invest in other start-ups, thereby stimulating the economy.This has been done before, but didn't succeed; let's see if it can be different this time around.

My concern would be exactly how much this can stimulate the economy, mainly because the number of IPOs is down.

In addition, and the article outlines this well, it is difficult for companies to offer an IPO, thanks to steps taken in order to protect investors.

Sarbanes-Oxley protects the investors, and it is needed, unfortunately, thanks to unscrupulous companies lke Enron and WorldCom.

In fact, Thomas Foley from Xchange noted that these issues have "made it more and more difficult for companies to make it to that next step." That said, Brogger believes that bulletin boards for 100 start-ups allowing buyers and sellers to post the price and number of shares they want to unload or purchase will help ramp up the number of IPOs.The problem I see here is that this is yet another way for people trying to get rich quick, which runs rampant in this sort economy.

Unfortunately, this is the sort of mentality that leads to the Enrons and the WorldComs.

I am not saying that this is the case -- it may be far from it -- but I worry that there are people out there that could be sucked in to something that may be too good to be true.



http://www.bloggingstocks.com/2009/06/29/want-to-invest-in-a-company-before-its-ipo/
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