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Strategies & Market Trends : ahhaha's ahs

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To: ahhaha who wrote (3369)	11/1/2001 4:36:37 PM
From: Don Lloyd	Read Replies (1) of 24758

ahhaha - ... The only reason they become public is to gain access to capital markets. ... This is true, but can take some elaboration. If I have 1000 cars to sell, am I better off trying to sell them to 1000 individuals, or to a single person or entity? Assuming that the selling costs are not too high, the total proceeds in the first case will tend to approximate the sum of the marginal utilities for a single car for each of the 1000 separate buyers. A person or entity who bids on the entire 1000 car lot will be using his marginal utility on the entire lot to set his bid, and this will almost always result in a far lower average price per car. Similarly, even though most company founders are initially funded by one or a few private capital sources, both the founders and initial investors will be better off if they can broadly re-distribute ownership by accessing the public capital markets. If ownership is distributed in 100 share lots to a variety of individuals, this will usually result in much less satiation of the demand and higher average prices than if the company is offered whole to a single individual or entity. Regards, Don

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