Business Share Prices and Market Fundamentals Flip

September 7, 2021

Share Prices & Consistent Yield

As I covered with creditors, businesses will be able both allocate funding and capital in exciting new ways. As businesses can now earn money more easily by simply by holding their assets within automated market makers or branded bank assets, it now becomes all about maximizing the pace of return on investments. However, this also drastically changes how companies are valued.

Most prevalently, shares or equities of companies instead of receiving their value only when sold now produce continual yield for owners, investors and employees. What this means is that you would be purchasing a fraction payout of a company’s overall yield rate. This is very similar to how dividends work today but thanks to the blockchain technology updating in real time, gone is the grunt accounting work needed for quarterly earnings report calculations. Furthermore, whereas a company previously set dividend return rates, the process is now fully automated and based, again, on ongoing expenses.

In practice a company’s accounting system would consist of three primary components, a primary blockchain wallet (cash), a creditor’s automated market maker asset, and a branded asset (primary “stock”). Its branded asset blockchain’s value would always be an aggregate of both its primary blockchain wallet and creditor’s representing its “true” value to the market.

The business’s branded asset chain would now enter its own automated market maker and like creditor’s have its daily interest payouts relative to its total capital. However, this market maker with low capital and low liquidity would not produce any meaningful yields. Without transactions changing the cost of the brand’s asset, there’s no movement. Without movement of money there’s also no recorded operating expense in the form of fees.

For example, a sole proprietorship of a $100 company or asset may make a sellable item for $40. This would now value the asset at $60. However, they sell the item for $50 which would then increase the asset value to $110. Compounding daily the market maker would yield 10% interest back to the proprietor’s personal primary blockchain wallet as they’re the sole owner.

Scaling business now becomes more flexible as businesses could either choose to offer employee ownership, yield ratio, or simply pay them as an operating expense. In the case of employee ownership everything would be in the form of ratios like how equity works today. However, instead of viewing a 1% equity stake as only being a dollar it will be important to note that the 1% will instead be the entitlement of 1% of all future yields that would be paid as often as daily. Pending how profitable a company would be when hiring, a 1% yield could be as much as a typical salary which would give more incentive to employees to continually yield transactions.

Funding Structures

Funding a company via investors also would be different in this scenario. In many cases such as research and development, companies simply will not have enough raw positive income to produce any meaningful yield. At the same time, as with creditors, businesses would only be allowed to carry so much capital to debt ratios depending on industry. Say, in AI research because the government would control this lever for all companies via the same asset chain, would allow a 250% ratio.

In practice this would mean that the same $100 company could now have $250 even though it is turning zero profit. In this example the additional $150 would trigger the automated market maker to increase but without any other transactions, there would be no interest made for any investor. The additional capital, though, would allow, say, $5 of operating expenses (salaries) to be paid.

This doesn’t seem like a drastic change but when you start to shrink accounting and finance down to days instead of weeks or months it allows investors to have more fine tune control of what they’re investing in. In the above scenario every 30 days would require continual investment from the funder. Transparency over what they’re funding, operations, would be critical as their money could be making them far more someplace else.

What they’re, again, looking for though is a locked in, high, interest yield that will eventually come in the form of revenue generating transactions. By being capped by capital to debt ratios, strengthens the need for continual re-evaluation of funding but also protects macro level money from being trapped within entities and not yielding for others where it would be better spent.