> Companies can ultimately fail even after going public. Later investors pay earlier investors, founders, or other shareholders by definition. There is nothing smart or dumb about either.
Smart Money = compensation via shares. It's "smart" because it generally grows quickly in value based on the companies pefformance, versus the dollar which only grows in value when the overall economy (standard of living) improves.
Dumb Money = compensation in cash.
Executive/early investor compensation via smart money really only became the norm when the government started to crack down on massive corporate salaries (1). i.e. massive "dumb money" payouts.
> Employees have options for liquidating there shares as well in the secondary markets.
Not all companies pay employees (especially those in lower tier roles/hired after a companies founding) in smart money. For instance, my company currently only pays in dumb money (no stock) below the VP level. About 7 years ago, we used to be employee owned, and we recieved/could purchase shares (technically smart money). They matched our 401K's with these shares. However, these shares were VERY different from the shares issued to corporate leadership. We were not allowed to liquidate until 5 years after leaving the company. When the company started to tank, the share dropped from $20 to virtually zero and corporate officers liquidated their shares quickly. Ultimately, the employee stock was dissolved completely when the company was sold. I personally lost $100K. The ex-CEO committed suicide this year - I'm assuming from guilt.
i am sorry for your monetary loss and your ceo's family. But, it sounds like you would have been better off with dumb money, than smart shares... remember you can purchase smart shares with dumb money, and you can sell smart shares for dumb money on the secondary markets, via forward contracts if there are some restrictions...
Smart Money = compensation via shares. It's "smart" because it generally grows quickly in value based on the companies pefformance, versus the dollar which only grows in value when the overall economy (standard of living) improves.
Dumb Money = compensation in cash.
Executive/early investor compensation via smart money really only became the norm when the government started to crack down on massive corporate salaries (1). i.e. massive "dumb money" payouts.
> Employees have options for liquidating there shares as well in the secondary markets.
Not all companies pay employees (especially those in lower tier roles/hired after a companies founding) in smart money. For instance, my company currently only pays in dumb money (no stock) below the VP level. About 7 years ago, we used to be employee owned, and we recieved/could purchase shares (technically smart money). They matched our 401K's with these shares. However, these shares were VERY different from the shares issued to corporate leadership. We were not allowed to liquidate until 5 years after leaving the company. When the company started to tank, the share dropped from $20 to virtually zero and corporate officers liquidated their shares quickly. Ultimately, the employee stock was dissolved completely when the company was sold. I personally lost $100K. The ex-CEO committed suicide this year - I'm assuming from guilt.
1. https://www.washingtonpost.com/news/on-leadership/wp/2017/11...