Gilder: "The Outsider Trading Scandal"
George Gilder piece in WSJ - 14 years ago:
The law for information disclosure by public companies and those aspiring to go public prohibits the release of materially significant news unless it is published simultaneously to the world. This well-meaning rule is supposed to create a level playing field, so that no investors have the advantage of inside knowledge. But the result is to reduce the amount of real information reflected in stock prices. [...]I agree that there is a problem getting information about companies, and that investors in most types of public companies have access to paltry amounts of information.
In an environment where inside information is banished from markets, much of the value is harvested not by the public but by organizations like General Electric, Cisco and Berkshire Hathaway that increasingly are not companies at all but portfolios of assets, whose strength is full access to inside knowledge about their holdings. Similarly, venture capitalists command full intimate knowledge of their target firms. [...]
Deprived of knowledge, investors become paranoid and jump at every movement in the shadows. They debate the implicit punctuation in speeches by Alan Greenspan. They weigh merger rumors down to the milligram.
However, I think he needs to consider the cause of this a little deeper: why aren't public companies comfortable releasing to the public the information that they would be (or apparently were) willing to discuss at meetings with big institutional investors? It must be fear of litigation.
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Info=measurement=accountability
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