FAQ

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Q. How was the PLAN developed?

A. The PLAN took years to fully develop after figuring out the mechanics of the stock market and realizing a balanced approach offered a better way to achieve the same results. Borrowing a phrase from Robert Kuttner, the PLAN offers a solution to taming capitalism in the public interest. Many people will be focused on the PLAN itself. But, we offer details below for those who wish to understand the need for change. We are dedicated to serving the community and providing a social benefit. Naturally, we are keen to solve the problems of funding public needs. Bear in mind, IPOs, M&A deals and stock buybacks are top business exit strategies, which are planned ways company founders and early investors may extract funds from a company to their benefit for varied reasons.

Q. So, how do you propose to balance capitalism™?

A. First, let us address the distribution of share capital following IPOs and secondary stock issues in a balanced and fair way. Once this rationale is understood, it will be easy to apply similar logic to M&A deals, stock buybacks and DAF growth funds. Here's the current format. A private company goes public, generally, because it needs share capital to grow and expand its company. During an IPO, the firm issues stock in the primary market to raise share capital. Now comes the PLAN’s revised format. Following an IPO, the public firm will be required to distribute one half of its share capital into a universal social net. In the future, if the firm needs more share capital, it will issue more stock in the secondary market. Following the secondary offering, the firm will be required to distribute one half of this share capital into the universal social net. Down the road, if the firm needs more share capital, the process will be repeated.

Q. Let me see, if I have this correct. A public company will be required to distribute one half of its share capital to support the funding of a universal social net, but will be allowed to keep the other half to grow and expand its corporation, right?

A. Correct.

Q. So, under the PLAN, a public firm will need to issue stock in two separate stock issues to retain the same amount of share capital acquired now in one issue, right?

A. Yes, That is accurate. Or else, a public firm may double the stock issued in one issue to retain the same amount of share capital.

Q. What is meant by "a reasonable period of time" in the defined PLAN for existing public corporations?

A. The time period will be handled by the administrative judge on a case-by-case basis, extending from a few months to a few years.

Q. Does the PLAN have a fixed ceiling for the basic income program?

A. Available funds will be a key factor in determining an income ceiling. Achieving a comfortable balance between individual/family needs and taking into account society's long term welfare will be a consideration. People will need a basic income program they will be able to count on. Stability is an important consideration. That is why establishing a minimum threshold ceiling is important. A two tier basic income program may be considered. A secondary tier tied to a percentage of GDP may be established above a minimum threshold ceiling. Basic income in the secondary tier will be higher when the GDP does better. A poorer GDP means basic income in the secondary tier will be lower.

Q. How will the PLAN affect stock prices?

A. The unique PLAN will lead to an expansionary economic policy, which leads to increases in the stock market, because it will generate increased economic activity and an improvement of financial conditions. Notwithstanding, according to Investopedia, structural change is often sparked by global shifts in pools of capital. Not only will businesses have to adapt to the new order, but so will markets. The dynamism that is inherent in the system depends on the nature of what is driving the structural change. Policy shocks are changes in government policy that have a profound economic effect, which might even be the goal of a government action. The stock market will anticipate and integrate the policy change into its market dynamics during the political build up before an actual policy change takes effect. It is important the change is handled in a positive light.

Q. Will public corporations support the PLAN?

A. By creating educational awareness and building a political groundswell of support for the PLAN, public firms will be awakened to the societal benefits of the PLAN and understand the need to make a change in the status quo. The PLAN levels the playing field, but does not harm a public corporation's ability to acquire share capital. It will simply change the strategy of how to go about it. The PLAN may well be viewed as an inconvenience for corporate America, but will not serve as an impediment over time. According to change management theory and practice, the principles of change management will need to be applied during the transition process. These principles include the need to understand change, plan change, implement change and communicate change. Many public corporations will be initially resistant to change, but adaptability and assimilation requires flexibility and humility. We trust public corporations will rise to the challenge and adapt to the change, because they will recognize the public necessity.

Q. How is the stock market affected by the PLAN?

A. The PLAN will not affect the structure of the stock market. It will only affect the amount of share capital a public corporation will be allowed to retain after a stock issue. Any stock price volatility will soon subside since the market will factor in a bright economic future. To understand the PLAN, it is necessary to understand who pays for share capital and the subsequent consequences in order to appreciate why the PLAN is necessary. The key points to understand is that there are net winners and net losers in the stock market, and the net losers pay for all net winnings, including all share capital generated by IPOs and secondary stock issues.

Q. Why is the PLAN necessary?

A. There is no better time to advance the PLAN than the present. Since the net losers in the stock market pay for all share capital, they may be categorized, for discussion sake, as a 'class of people', which is defined narrowly as a group of people sharing the same economic status. This class of people have been exploited unfairly in no small measure. Exploitation is narrowly defined as the act of using resources of people unfairly in order to benefit from their efforts. Unfairly is defined as a manner that is not in accordance with the principles of equality and justice. The PLAN takes into account the plight of this 'class of people'.

Q. The stock market is a game of chance and, after all, the net losers ultimately lose their bets, right?

A. Correct on both accounts. A more important question needs to be asked and answered. When does a game of chance stop being a game? The correct answer: it depends on the game’s degree of seriousness, which is defined as the degree to which something is bad. The losses of a single net loser in the stock market has a lesser degree of seriousness than the losses of an entire class of net losers in the stock market. The plight of this entire class of people is real and the degree of seriousness ranges to an extreme level, considering the staggering amount of their financial losses. To reiterate the point, synonyms of seriousness are solemnity, graveness, distressfulness, dangerousness, grimness, depression, melancholy, gloominess, miserableness, severe-ness and death, i.e., extreme seriousness.

Q. What makes this class of people different than say…the net losers in Las Vegas, the horse track or Atlantic City?

A. There are three things to consider: scale, significance and stakes. Financial losses in Las Vegas, the horse track or Atlantic City go towards supporting the gambling industry. The financial losses in the stock market go towards supporting corporate America and not just a single sector of the economy. The distinction between these two classes of net losers is significant and the stakes could not be starker. The gambling industry in the U.S. is worth $261 billion dollars and holds 1.8 million jobs (Casino.org). On April 9, 2021 the capitalization of the entire U.S. equity market was $43 trillion dollars, as measured by the Wilshire 5000 Index (Market Watch). The PLAN will provide a basic income to all U.S. citizens that qualify, which includes citizens in the gambling industry.

Q. But under the PLAN, the net losers will continue to pay for all share capital and net winnings in the stock market, right?

A. Yes, that is correct. The PLAN does not reinvent the wheel. But it is fair to say, $43 trillion is quite enough of the net losers’ largesse…without imposing an equitable remedy to mitigate the net losers’ plight. It is impossible to calculate how much these staggering net losses in the stock market have negatively impacted American lives across generations. The PLAN will right the ship of commerce and industry.

Q. It seems you are equating the class of people categorized as net losers in the stock market with the general public, right?

A. For this discussion, the general public and the class of people categorized as net losers in the stock market are one and the same. According to Pew research, more than half of U.S. households have some investment in the stock market. These households and the other half of American households likely have had parents, grandparents, great grandparents and so forth, who were involved in the stock market at some point in time, because the general public has been supporting public corporations for over 260 years—Dupont (1802), J.P. Morgan (Chase) (1799), Jim Bean (1795), Cigna (1792), State Street, formerly Boston’s Union Bank (1792), Bank of New York (1784), Bowne, now RR Donnelley (1775), Ames True Temper, Lawn & Garden (1774), Lorillard Tobacco Co. (1760). An inclusive perspective is required to ensure the system works for everyone. Keep in mind, public consumers, over the many decades, have purchased the goods and services offered by public corporations, causing stock prices to rise and fall. And, net losers in the stock market have always ultimately paid for stocks whether rising or falling.

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Q. It is common knowledge public corporations are primarily concerned with profits and shareholder value, right?

A. Yes, but this business strategy fails to recognize, much less remedy, the shareholders who ultimately pay for the share capital generated in the primary and secondary markets.

Q. Will the guaranteed basic income program be considered taxable income?

A. No, since a public corporation pays no taxes on money received from an IPO or secondary stock issues. A capital gains tax will be paid when share capital is sold at a gain. Fair is fair. Why should an individual pay taxes for receipt of money from a basic income program, since it is derived from the same source of funds. Keep in mind, state sales taxes will be paid when such monies are spent on goods and services, and federal taxes will be paid when investments are sold as a capital gain. This approach offers a basic sense of fairness to taxpayers.

Q. Will an increase in issued stock dilute the value of stocks?

A. Without getting deep into the weeds, a public corporation’s legal provisions will need to incorporate adjustments to its earnings per share and ratios for its valuation to counter dilution effects in the event of future stock issues. For example, a weighted average approach or a full ratchet approach are two ways, among other adjustment options, which may be used to counter-dilution effects. If interested, you may study these approaches on-line. Although the issues involved can be complex, one need not have an MBA or be a financial analyst to understand the basics.

Q. I am wondering if the PLAN will be construed as a corporate tax?

A. No, because a corporate tax is a levy placed on corporate profits.

Q. Will the PLAN harm the economy?

A. The PLAN will infuse the economy with an abundant amount of financial wherewithal to mend America’s social inequalities—a remedy that will obviously invigorate the economy on a recurring basis without adding to America’s debt or placing a burden on taxpayers. Actually, the PLAN eases the burden on taxpayers considerably.

Q. Can the proposed economic model be used worldwide?

A. Yes, the PLAN may be implemented in all countries with stock markets. There are stock exchanges in the Middle East, Europe, Asia Pacific, Africa and North America. Perhaps, this model will encourage stock exchanges in South America and elsewhere.

Q. Will the PLAN negatively affect mutual funds?

A. Most mutual funds have bylaws which prevent fund managers from investing in IPOs in the primary market. The PLAN will affect the distribution of public capital grown in investment pools called DAFs, which may be set up as active or passive mutual funds, but applicable only if the corporate public foundation participates in raising share capital in an IPO and secondary issues.

Q. Do stock buybacks offer an alternative remedy to balance the stock market for the general public?

A. No, since shareholders who receive money from stock buybacks may not be the net losers in the stock market, who ultimately pay for the IPOs and secondary stock issues, because they have already sold their stock at the time of a buyback.

Q. So, why not just repay the net losers directly, rather than indirectly through a basic income program?

A. If even feasible, logistically, due to high-frequency trading, flash trades and other issues, the notion would affect the equity market to an unacceptable degree.

Q. So, the PLAN will not affect private businesses, right?

A. Private companies are not listed on public stock exchanges. Private businesses and their employees will benefit from a basic income program.

Q. What do you think about the idea of taxing stock trades to pay for universal social programs?

A. We support this progressive idea. Taxing stock trades is another idea to fund universal social programs, but will not fully remedy the economic imbalance. Also, instituting a wealth tax on the top one-percent is another good idea to fund social programs.

Q. Now that I understand the rationale involving IPO’s and secondary stock issues, please explain why the PLAN includes M&A deals.

A. Share capital supports the growth and expansion of a public corporation, allowing it to be in the position to participate in an M&A deal. Thus, a remedy for the exploited net losers is required. A private company involved in an M&A deal will also benefit from the share capital of a public corporation. So, all M&A deals involving a public company will be required to adhere to the PLAN. To be clear, mergers and acquisitions (M&A) refers to the consolidation of companies or assets through various types of financial transactions. The company that pays to acquire another company is known as the acquirer and the company to be purchased or acquired is referred to as the target. Keep in mind, a proposed deal may be structured at a higher transaction price to provide a target with more proceeds after satisfying PLAN requirements.

Q. How will the PLAN effect stock buybacks relating to public companies.

A. Stock buybacks involving a public company will be required to adhere to the PLAN. A stock buyback is when a public company buys back shares of its own stock. If a public company claims only its profits are used to buy back stocks, it will be reminded that its share capital ultimately paid for by the net losers in the stock market supported the generation of its profits.

Q. Explain why DAFs are included in the PLAN?

A. A corporation may create a private or public foundation. Public foundations may create a donor-advised growth fund (DAF) to grant money to charitable causes. As a legal public corporation, a DAF may undertake an IPO and benefit from share capital. Any DAF, benefiting from an IPO or secondary stock issues, will be required to adhere to the PLAN. According to a National Philanthropic Trust (NPT) market overview, in 2019 the charitable assets in DAF funds totaled $141.95 billion, while donor contributions totaled $38.81 billion and grant money totaled $27.37 billion. These statistics indicate (after simple subtraction) that $103.14 billion of these funds were grown in the stock market over the long-term, where net losers in the stock market paid for the $103.14 billion of charitable assets in DAF growth funds. The PLAN offers a suitable remedy for this measure of exploitation.

Q. Will the PLAN allow the form of payment distributed into the universal social net to be either cash or stocks?

A. Preferably cash, but other financial assets, fixed assets, and cryptocurrencies may be considered by the administrative judge.

Q. If a private company undertakes an IPO and in the future this same public company undertakes an M&A deal and/or a stock buyback, will this company be required in each deal to adhere to the PLAN?

A. Yes, each of these business deals are supported by the growth and expansion of share capital after benefiting from an IPO and secondary stock issues and will be reviewed on a case-by-case basis.

Q. Is the stock market a zero sum game?

A. Yes, the net change in wealth among buyers and sellers in the stock market is zero. After each trading day, each stock trading account, generally including numerous stocks, shows either a net win or net loss. The combined net wins must equal the combined net losses, because there is no other place for net wins to come from except the net losers’ pockets, i.e., a 50/50 proposition.

Q. So, that means the stock market is gambling?

A. Yes, legalized gambling. Because of its silence on the issue, Congress has exempted the stock market from illegality. The odds (50/50) of winning a coin toss may be fairly characterized as gambling, but it is important to note, the PLAN circumvents the gambling issue embedded in market mechanics. We mention it only to explain the concept of net winners and net losers in the market to better understand the PLAN.

Q. Generally, how many IPOs are there each year?

A. There were 480 IPOs on the U.S stock market in 2020, setting the record. Over 11% of these IPOs generated proceeds over $500 million. IPOs raised total proceeds of $145.3 billion in 2020. There were 232 IPOs in 2019, raising proceeds of $56.2 billion. There were 397 IPOs on the U.S. stock market in 2000, the previous record-setting year (Statista.com).

Q. Will the PLAN apply to "direct listing" public companies?

A. An alternative to IPOs, direct listing allows a company to go public without a block of stock being sold, and therefore without new capital being raised. Although, new rules do allow direct listing companies to raise capital similar to an IPO. A direct listing gives founders, vested employee shareholders, and prior investors a path to liquidity (Crunchbase News). This alternative to going public typifies secondary stock issues, and IPOs, under the new rules, both of which falls under the PLAN. Since, all stock sold in the stock market is ultimately paid for by the net losers, the PLAN offers a suitable remedy. Also, the PLAN will apply to "special purpose acquisition" companies and "blank-check" companies, other alternatives to the traditional IPO.

Of the 3,671 public corporations in the U.S. reported by the Wall Street Journal in 2017, there were only 8 black owned companies” (Investopedia).