non-profit stock market

November 19, 2006 at 10:51 am Leave a comment

in which shares are traded and then the holder receives a tax break based on the non-profits performance. Let’s say Greenpeace has a particularly good year conserving wildelife then it’s stock would be worth a larger tax break than a different NGO. NGOs could be judged off their paticular criteria say elimating a disease, uplifting povery etc. This would mean their value could be judged in terms of the government, how much did say the acumen fund help a government say in poverty relief by funding businesses etc? This would help in two different ways, first NGOs would need to announce and make transparent their ideas for a project and the financing needed. You would then buy a share in a project you think would be usefull. If the project succeeds a bigger break if it fails you would need to sell or take a smaller tax break and hope that the project in the long haul would be more sucessfull. Hence, if a project needed more money to finance itself and was sucessfull it would be valued higher when it introduced new stock and bad projects would find it harder to get funding. Hence NGOs would have a better incentive to make their projects more successfull.

Several problems with this:

1. It would be hard to do in the U.S. right now due to the fact that one donation couldn’t count as a tax credit multiples times. Hence each market would have to expire like a prediction market at a set time (say every quarter).

2. In order for an investor in a more sucessfull project to receive a larger tax credit they would legally need to make a larger investment i.e. pay for money. One way around this is to transfer funds from a less successfull project to a more sucessfull. In other words let’s say project A’s IPO is $5.00 per share, and project B’s IPO is $5.00, but at the end of the quarter Project A meets it’s goal and Project B fails. Part of Project B’s value could be transfered to A, meaning that an investor in project A would receive an e-mail stating their investment and tax credit while investors in B would get a smaller tax credit.

3. How could the value of a stock go up? This would mean that investor A sells to investor B. Does investor A get money back or does their donation stay in the system (I say give them the money and let investor B get the tax credit)? Hence you can make money from giving.

4. Obviously some people wouldn’t like to be on the receiving end of a failed project and also getting out of a project like would be hard.

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Entry filed under: media.

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