If you are a newshound like me you are probably aware of last week’s headline announcing the 2021 launch of The Dream Exchange, the first black-owned stock exchange in the 230 years of the existence of the United States Stock Exchange. This newly announced exchange, created by Attorney Joe Cecala in partnership with Cadiz Capital Holding LLC, should make those of us in the black community cautiously optimistic.
Citing financial iniquities between black and white Americans that have come to light during the Coronavirus pandemic while announcing a historic proposal for a $350 billion dollar investment in communities of color, Senator Cory Booker stated, “The coronavirus pandemic has not only exposed, but also exacerbated, the deep, structural racial inequities that have been taking the lives and livelihoods of people of color, and Black Americans in particular, for centuries. Righting these wrongs will take deliberate and sustained effort and investment, and we cannot afford to go back to what was accepted as normal before the pandemic began. This proposal is an important step forward in building a new normal and an economy that truly works for every American.” – continue with the 1. Trillion dollars contributed to the economy.
Typically, white investors shy away from minority companies. As, both, a Private Equity Investor who lends capital to businesses, and as a business owner who was once in the position of trying to raise capital, I have seen the sharp racial disparities in our financial system firsthand. A black owned stock exchange will give minorities the opportunity to find investors who look like them, as well as opportunities to invest in their own communities. Business owners, particularly black business owners, tend to shy away from the idea of taking their companies public because of the regulations, financial transparency issues, legal and accounting costs involved. And let’s not forget the intimidation factor and a feeling of being financially disenfranchised. Black people have a generational distrust of authority, and that includes our financial system. I am here to tell you that, if done correctly, the advantages can outweigh the disadvantages and help to build generational wealth in our communities.
There will be an option specifically created to support black-owned business and investment interests. This helps companies gain access to capital and companies who have capital can hire more employees. Studies continually show that people tend to hire people who look like them and have similar cultural sensibilities. Right now, we live in a country where 76% of American millionaires are white or Caucasian. Currently, less than 8% of millionaires in the US are Black Americans are millionaires. This means that most of us until now, have not been job creators. If we are not job creators, we cannot hire each other. This means we are dependent upon a slanted job market, leaving many of us out in the cold despite our talent or education. We must do better.
Movements like #blacklivesmatter and #blackwealthmatters cannot be fully realized in terms of necessary public policy that will keep us safe and insulate us from discrimination and death until we acknowledge the important role that black wealth in America plays in this equation. Systemic racism has been able to take root since the early days of our emancipation, because if we are being honest, as a collective race of people in the United States we have never really been financially empowered or financially free. Because of this, we have failed to attain the socio-political influence we need to ensure that our local and regional politicians, including members of law enforcement, have to place any relevance on our lives. One of the major reasons that we, as a collective, have not attained generational wealth and political influence is because we have historically been systematically shut out of key financial systems and institutions in this country.
As a private equity investor, I have held the distinction of sitting on the board of three of the less than fifteen black managed and operated publicly traded companies that exist in the United States. This is an impressive feather in my cap, but a dismal fact for black people. There are currently approximately fourteen thousand publicly traded companies in the United States and less than fifteen of those companies are managed and operated by black people. We are financially marginalized and must change. Public policy goes where money flows, and money is not flowing from our communities. With this newly developed Dream Stock Exchange, we can dare to hope that black owned companies will be included in the financial process as they will be provided a clear path towards raising capital and taking themselves public with the help of this newly minted stock exchange.
The first Black owned stock exchange in the United States will harness the power of venture capitalists and private equity investors who see the value in loaning capital to black owned businesses and taking them public. This will allow these companies to further prosper from selling shares of their respective companies and hiring more people that look like them.
This exchange will likely be more affordable and more accessible for all. I do believe there will be many businesses, not just black-owned businesses, who realize that they cannot afford the more established stock exchanges and will want to get on The Dream Exchange, which will also make them a part of history where they too can benefit from this new and fertile ground.
The Dream Exchange can establish itself by reaching out to black companies and educating our community about the power of investing in black businesses, or of going public to obtain the capital necessary to thrive and hire. Black businesses need to awaken to the benefits of gaining access to capital and working with people who look like us to bring successful business and jobs into our communities. In addition, we need to teach corporate interests to have an appreciation and respect for our dollars, not by being blind consumers, but by showing that we, too, know how to leverage our dollars into income producing assets to strengthen our communities.
I always use the Amazon story. Amazon lost money for ten years. If you are losing money, you cannot go to the bank and borrow money. Unless a venture capitalist or a private equity like myself comes and shares your same vision they are not likely to put money into your business. If you are public, however, you may have access to monies that will allow you to run and operate your business while you work out the kinks.
As people purchase your stock they are investing in your business. The initial investors are purchasing your stock. From that point, those initial investors are selling stock to other investors who want to own a piece of your company.
The benefits may far out-weigh the additional costs.
In terms of more of us becoming investors rather than spenders, many black Americans tend to have less disposable capital to invest, but it is not impossible. While it may be difficult to invest in stocks that are significantly higher, The Dream Exchange presents the opportunity to invest in companies where the stock price may be lower and the eventual appreciation potentially greater. Up and coming stocks like penny stocks, which are anything under $5.00 per share, enable people on a tighter budget to buy more shares of an up and coming company which is driven by assets of the company and earnings per share. You can invest in a newer black company for less than 5.00 per share and as that company matures and grows in value that stock that was a dollar a share can now be worth three or four dollars per share, in just a few short years, helping you to start to build wealth.
The economic empowerment of black people will generate more tax dollars coming out of our communities, get more people into government office who will champion our cause. This will help create more jobs within the black community, and by doing so, could play a more positive role in the political world with people who will champion our cause because of our cultivation of wealth. It will allow us to elect politicians and place us on equal footing to eventually eradicate police brutality and other forms of discrimination and brutality. It will be a lot harder to do when our people can afford attorneys and other insulating resources that have eluded us.