The liquidity premium of modern enterprises comes from the capital market. This premium is related to the enterprise's profit, 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 enterprises after listing mainly stems from investors' irrational frenzy, because the growth premium represented by the company's profit has already been reflected in the issue price-earnings ratio. In reality, neither stock investment nor equity investment have the profit motive of capitalists and entrepreneurs. Although their gains are premised on the sustainable growth of the enterprise, stock investors focus more on the transactional premium of the enterprise, while equity investors focus more on the liquidity premium. I have said before that transaction value is the mainstream value of modern financial markets. So what is liquidity premium? It is a form of transaction value, which is also 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.
Equity investment pursues "freedom" far more than the desire for profit. In the trade-off between profit maximization and liquidity premium, equity investors prefer liquidity, while capitalists prefer profit maximization. Therefore, the game of "Dou Dizhu" is not always winner-takes-all. After the company goes public, capitalists have the highest premium in terms of book assets, but due to lack of freedom, their book asset premium will fluctuate with the sharp rise and fall of stock prices. Capitalists not only have to bear the operational risks of the enterprise, but also the trading risks of stocks. After equity investors exit, stock investors will come and go like a revolving door, and entrepreneurs can choose to cash out perfectly after realizing their equity incentives, except for capitalists who do not have this freedom. In this round of "Dou Dizhu", the loser becomes the capitalist, because the enterprise's pursuit of profit maximization is both an incentive and a shackle.
After returning home, I learned about the game of "Real Money Dou Dizhu". In a three-person card game where two play against one, from the perspective of fairness, it is very asymmetrical. This is very similar to the way modern enterprises operate. Capitalists, entrepreneurs, and equity investors sit at the table, issuing part of the shares at a high premium to stock investors. A year later, equity investments fade out, completing the entire investment process, and internal peace is restored between the principal and the manager.
The exit of equity investment involves trade-offs. After years of hard work cultivating the enterprise, choosing to exit at its most glorious stage means not taking away the company’s profits or sharing in its future growth. This mindset can be interpreted through rewriting a famous poem: Profit is truly precious, growth even more valuable, but for the sake of freedom, both can be discarded. Here, "freedom" represents the liquidity of capital, and the cost of obtaining "freedom" is neither past profits nor future growth, but rather the liquidity premium obtained by the enterprise after going public.
In the card game of modern enterprises, it is not always winner-takes-all; capitalists without "freedom" may easily be trapped in "chains."
Saying No to Winner-Takes-All
After returning home, I learned about the game of "Dou Dizhu." In a three-person card game where two play against one, from the perspective of fairness, it is very asymmetrical. This is very similar to the way modern enterprises operate. Capitalists, entrepreneurs, and equity investors sit at the table, issuing part of the shares at a high premium to stock investors. A year later, equity investments fade out, completing the entire investment process, and internal peace is restored between the principal and the manager.
Enterprise development has three stages: start-up, growth, and maturity. 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 influences capitalists, turning them, and even entrepreneurs, into equity investors.
Definition of Bubble
If this is the first round of the game, the winners are ranked accordingly: the capitalist has the highest book premium, followed by the equity investor, then the entrepreneur, and finally, the stock investor bears the transaction risk. However, from the perspective of liquidity, the equity investor exits with a premium and no longer bears the operational risks of the enterprise.
If this is the first round of the game, the winners are ranked accordingly: the capitalist has the highest book premium, followed by the equity investor, then the entrepreneur, and finally, the stock investor bears the transaction risk. However, from the perspective of liquidity, the equity investor exits with a premium and no longer bears the operational risks of the enterprise.
The exit of equity investment involves trade-offs. After years of hard work cultivating the enterprise, choosing to exit at its most glorious stage means not taking away the company’s profits or sharing in its future growth. This mindset can be interpreted through rewriting a famous poem: Profit is truly precious, growth even more valuable, but for the sake of freedom, both can be discarded. Here, "freedom" represents the liquidity of capital, and the cost of obtaining "freedom" is neither past profits nor future growth, but rather the liquidity premium obtained by the enterprise after going public.
Saying No to Winner-Takes-All
The liquidity premium of modern enterprises comes from the capital market. This premium is related to the enterprise's profit, 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 enterprises after listing mainly stems from investors' irrational frenzy, because the growth premium represented by the company's profit has already been reflected in the issue price-earnings ratio. In reality, neither stock investment nor equity investment have the profit motive of capitalists and entrepreneurs. Although their gains are premised on the sustainable growth of the enterprise, stock investors focus more on the transactional premium of the enterprise, while equity investors focus more on the liquidity premium. I have said before that transaction value is the mainstream value of modern financial markets. So what is liquidity premium? It is a form of transaction value, which is also 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.
Equity investment pursues "freedom" far more than the desire for profit. In the trade-off between profit maximization and liquidity premium, equity investors prefer liquidity, while capitalists prefer profit maximization. Therefore, the game of "Dou Dizhu" is not always winner-takes-all. After the company goes public, capitalists have the highest premium in terms of book assets, but due to lack of freedom, their book asset premium will fluctuate with the sharp rise and fall of stock prices. Capitalists not only have to bear the operational risks of the enterprise, but also the trading risks of stocks. After equity investors exit, stock investors will come and go like a revolving door, and entrepreneurs can choose to cash out perfectly after realizing their equity incentives, except for capitalists who do not have this freedom. In this round of "Dou Dizhu", the loser becomes the capitalist, because the enterprise's pursuit of profit maximization is both an incentive and a shackle.
Definition of Bubble
Enterprise development has three stages: start-up, growth, and maturity. 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 influences capitalists, turning them, and even entrepreneurs, into equity investors. In such cases, in the card game of modern enterprises, it is not always winner-takes-all; capitalists without "freedom" may easily be trapped in "chains."
Forum Signature: Cheng Ming: Modern Enterprise "Dou Dizhu"? Wandering Series - Blood Tower Gate Dou Dizhu
Shenzhen Ultrasonic