March 25, 2009


Posted in Your Ideas · 1 comment ·

Investing 101 — IPO’s raise funds for companies in the so called Primary Market.
The Secondary market (i.e. post-IPO) doesn’t directly help companies fund expansions etc.
Instead of encouraging speculation on the secondary market, the government should incentivize people to get involved in schemes such as BES (Business Expansion Scheme). This is already quite tax efficient for investors — but more should be done to encourage investment directly in these smaller, entrepreneurial companies. To reduce investor risk, funds can be set up to diversify investment across qualifying companies.
Don’t waste euros on Eircom-style IPOs or on the secondary market. Help out the real bread-n-butter companies.

  1. Brollachain

    The problem with BES as implemented here is that, kin the late 1980s, it was extended to property-backed businesses. The effect of this was that investors tended to back those businesses that could be sold as have the security of a property backed exit mechanism. IMO, this is not the kind of business that we, the taxpayers, should give a tax-based incentive to, as t lessens the flow of funds to the growth of businesses that have potential to be trade in international markets.

    It was William Kingston, a Reader in Innovation in TCD, who first set out the logic for what eventually became the BES in the UK and which was copied here, before being extended to propert-based assets.

    The paper in which William Kingston set out the logic for such an investment mechanism was

    The Financing of New Businesses in, editor(s)The U.K. Cabinet Office , Industrial Innovation, London, The Stationery Office, 1979,

    If anyone really want to read the argument, which I believe to be still useful for us in Ireland, I suggest that you might email William Kingston at TCD and ask him to send you a copy. He has also presented many other ideas for encouraging innovative businesses.

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