The exit of equity investment is a matter of trade-offs. After painstakingly nurturing a company for many years, choosing to exit at its most glorious stage means not taking away the company's profits and no longer sharing in its growth. This mindset can be interpreted by rewriting a famous poem: "Profit is truly precious, growth is even more valuable, but for the sake of freedom, both can be forsaken." Here, "freedom" refers to the liquidity of capital, and the price of obtaining "freedom" is neither past profits nor future growth. What is it then? It is the liquidity premium that the company gains after going public.
After returning home, I learned about the game "Real Money Dou Dizhu," where in a three-player card game, two players team up against one. From the perspective of fairness, this setup is extremely asymmetrical. This is very similar to the modern corporate play, where capitalists, entrepreneurs, and equity investors sit together, issuing a portion of shares to stock investors at a high premium. A year later, the equity investment gradually exits, completing the entire investment process, and internal peace between the owner and the manager is restored within the company.
After returning home, I learned about the game "Dou Dizhu," where in a three-player card game, two players team up against one. From the perspective of fairness, this setup is extremely asymmetrical. This is very similar to the modern corporate play, where capitalists, entrepreneurs, and equity investors sit together, issuing a portion of shares to stock investors at a high premium. A year later, the equity investment gradually exits, completing the entire investment process, and internal peace between the owner and the manager is restored within the company.
The development of a company has three stages: the start-up phase, the growth phase, and the maturity phase. Equity investors can choose to enter during the start-up phase and exit during the growth phase, giving up the pursuit of profit in exchange for liquidity premium. This behavioral pattern sometimes also spreads to capitalists, turning them, and even entrepreneurs, into equity investors. In such cases,
the liquidity premium of modern companies comes from the capital market. This premium is related to the company's profits, but there is no linear relationship. The fact that the Growth Enterprise Market (GEM) opened with a sharp increase indicates that the premium obtained by companies after listing mainly comes from the irrational frenzy of investors, because the growth premium represented by corporate profits has already been reflected in the issue price-earnings ratio. In fact, neither stock investment nor equity investment have the profit motives of capitalists and entrepreneurs, although their returns are based on the sustainable growth of the enterprise, stock investors pay more attention to the transactional premium of the enterprise, while equity investors pay more attention to the liquidity premium. I once said that the trading value is the mainstream value of the modern financial market, so what is the liquidity premium? It is a form of trading value, which is commonly known as an asset bubble. If I were to define an asset bubble, it would be: the liquidity premium generated based on expectations and transactions.
Saying No to Winner-Takes-All
In the card game of modern enterprises, it's not always winner-takes-all; capitalists without "freedom" may very well be shackled.
Saying No to Winner-Takes-All
The liquidity premium of modern enterprises comes from the capital market. This premium is related to the company's profits, but there is no linear relationship. The fact that the Growth Enterprise Market (GEM) opened with a sharp increase indicates that the premium obtained by companies after listing mainly comes from the irrational frenzy of investors, because the growth premium represented by corporate profits has already been reflected in the issue price-earnings ratio. In fact, neither stock investment nor equity investment have the profit motives of capitalists and entrepreneurs, although their returns are based on the sustainable growth of the enterprise, stock investors pay more attention to the transactional premium of the enterprise, while equity investors pay more attention to the liquidity premium. I once said that the trading value is the mainstream value of the modern financial market, so what is the liquidity premium? It is a form of trading value, which is commonly known as an asset bubble. If I were to define an asset bubble, it would be: the liquidity premium generated based on expectations and transactions.
The exit of equity investment is a matter of trade-offs. After painstakingly nurturing a company for many years, choosing to exit at its most glorious stage means not taking away the company's profits and no longer sharing in its growth. This mindset can be interpreted by rewriting a famous poem: "Profit is truly precious, growth is even more valuable, but for the sake of freedom, both can be forsaken." Here, "freedom" refers to the liquidity of capital, and the price of obtaining "freedom" is neither past profits nor future growth. What is it then? It is the liquidity premium that the company gains after going public.
Definition of Bubble
If this is the first round of the game, the winners are ranked accordingly, with the highest account premium belonging to the capitalist, followed by the equity investor, then the entrepreneur, and finally the stock investor bearing the transaction risk. However, from the perspective of liquidity, the equity investor exits at a premium and no longer bears the operational risks of the enterprise.
The development of a company has three stages: the start-up phase, the growth phase, and the maturity phase. Equity investors can choose to enter during the start-up phase and exit during the growth phase, giving up the pursuit of profit in exchange for liquidity premium. This behavioral pattern sometimes also spreads to capitalists, turning them, and even entrepreneurs, into equity investors. In such cases, in the card game of modern enterprises, it's not always winner-takes-all; capitalists without "freedom" may very well be shackled.
Equity investment's pursuit of "freedom" far exceeds its desire for profit. Between maximizing profit and liquidity premium, equity investors prefer liquidity, while capitalists prefer profit maximization. Therefore, the card game "Dou Dizhu" is not always winner-takes-all. After the company goes public, the capitalist has the highest account asset premium, but due to lack of freedom, his account asset premium will fluctuate with the skyrocketing and plummeting stock prices. The capitalist not only has to bear the operational risks of the company but also the transaction risks of stocks. After the equity investor exits, stock investors will come and go like a carousel, and entrepreneurs can choose to leave perfectly after realizing their equity incentives, except the capitalist who does not have this freedom. In this round of "Dou Dizhu," the loser becomes the capitalist because the company's pursuit of maximum profit is both an incentive and a shackle.
Definition of Bubble
If this is the first round of the game, the winners are ranked accordingly, with the highest account premium belonging to the capitalist, followed by the equity investor, then the entrepreneur, and finally the stock investor bearing the transaction risk. However, from the perspective of liquidity, the equity investor exits at a premium and no longer bears the operational risks of the enterprise.
Equity investment's pursuit of "freedom" far exceeds its desire for profit. Between maximizing profit and liquidity premium, equity investors prefer liquidity, while capitalists prefer profit maximization. Therefore, the card game "Dou Dizhu" is not always winner-takes-all. After the company goes public, the capitalist has the highest account asset premium, but due to lack of freedom, his account asset premium will fluctuate with the skyrocketing and plummeting stock prices. The capitalist not only has to bear the operational risks of the company but also the transaction risks of stocks. After the equity investor exits, stock investors will come and go like a carousel, and entrepreneurs can choose to leave perfectly after realizing their equity incentives, except the capitalist who does not have this freedom. In this round of "Dou Dizhu," the loser becomes the capitalist because the company's pursuit of maximum profit is both an incentive and a shackle.
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Shenzhen Ultrasonic