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Sovereign Wealth Funds and Long-Term Investing$
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Joseph Stiglitz, Patrick Bolton, and Frederic Samama

Print publication date: 2011

Print ISBN-13: 9780231158633

Published to Columbia Scholarship Online: November 2015

DOI: 10.7312/columbia/9780231158633.001.0001

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PRINTED FROM COLUMBIA SCHOLARSHIP ONLINE (www.columbia.universitypressscholarship.com). (c) Copyright University of Minnesota Press, 2019. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in CUPSO for personal use.date: 22 October 2019

Panel Paper

Panel Paper

L-Shares—Rewarding Long-Term Investors

Chapter:
Panel Paper
Source:
Sovereign Wealth Funds and Long-Term Investing
Author(s):

Patrick Bolton

Frederic Samama

Publisher:
Columbia University Press
DOI:10.7312/columbia/9780231158633.003.0034

This chapter presents a paper on loyalty shares (L-shares). L-shares reward buy-and-hold investors by granting them a call-option, or warrant, if they have held their shares for a prespecified loyalty period. These loyalty warrants (L-warrants), which can be offered by listed companies indiscriminately to all shareholders, would be especially attractive to shareholders seeking more long-term buy-and-hold investments. Currently, such shareholders have little choice but to invest in regular common stock and receive rewards that are essentially independent of the length of time they hold the shares. Moreover, these buy-and-hold shareholders are at a disadvantage relative to more speculative traders, who can cash in on a speculative option, or respond more quickly to news and exit before the buy-and-hold shareholders. L-shares would go some way toward redressing this imbalance between long-term and short-term investors. In particular, they would attract long-term nonspeculative investors, by providing a reward to those shareholders who have held their shares for a prespecified period of time, and they would repel day traders, momentum investors, and other short-term speculators.

Keywords:   loyalty shares, L-shares, loyalty warrants, long-term investment, investment strategy

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