New Ventures Society



  Options


The key to the member's profits will be in the options that are granted for subscribing in the new companies offered.


There are two paths to becoming wealthy.
1) Create a company and own most of it, grow the company over 5 decades, become public, and then retire with your shares which are worth a fortune.
2) Be an executive of a large successful company, reward yourself massive stock options, raise the stock price with short term gains, have company institute a buyback program, borrow from a bank, sell your shares to the company, grant yourself more options, repeat. You will strip the company of the wealth it has accumulated.


We will create a third path.
We anticipate the companies we create granting a block of options to purchase additional shares to each subscriber. A typical option would be a right to buy the stock at $10 for the first year, $20 a share  until year 10 and $40 a share for the balance of the 20 year life.


A shareholder owning 100 shares would have the right to buy 100,000 shares while a Founders Upgrade would grant the right to an additional 3 million shares.


Normally the retained earnings would slowly increase the book vale by about 10% a year. Thus the earning per share would increase and the share value as well. Using the Rule of 72 we would expect the book value to double in 8 years. At this point the options should be worth $20 a share if the P/E ratio is at 20 and ROI at 10%. Dumping a large amount of stock on the market would crash the price regardless of the inherent fundamentals. So the best way to take advantage of the highest price would be to have a private sale to organizations with large asset bases but which are desperate for profits like pension plans. Since most pension plans are built around achieving a 7% return on assets, the current bond market around 1% will kill the retirement plans of most workers. So offering them a $40 stock at $30 on condition that they hold onto it for a couple years would be a good deal for them - an immediate 33% profit. At the same time it would be good for our membership in that they clear over a million on the sale. The company just increases its book value thus enabling it to expand rapidly.


To allow the various pension plans to participate we need to have the companies pay a small dividend, some firms are prohibited from investing in firms that do not pay dividends.


One wrinkle that puts a damper on this proposal is that if every option were exercised at year 8, these companies would be the biggest corporations in the US. That of course will not happen, most owners will wait to the last minute to maximize their perceived profit thus allowing the company time to build assets in line with book value. At the same time the valuations for other companies will increase by a factor between 2 and 8, giving at most a membership in the top 10.