The Diplomat
November 13, 2008
Franklin & Marshall’s weekly online newsletter
Invest Local, Earn Local
Trexler Proffitt Jr.
While many Americans smart from losses on the national stock market, talk of keeping investment local seems to be raising interest.
Trexler W. Proffitt Jr., assistant professor of Business, Organizations & Society at Franklin & Marshall College, said the time is right for a central Pennsylvania stock exchange. He has been studying the concept and pitching the idea to local economic and political leaders.
“I see a lot of enthusiasm for this idea,” said Proffitt, who received a $10,000 grant from the Keystone Innovation Zone earlier this year to consider the feasibility of forming the Lancaster Sustainable Enterprise Stock Exchange.
Proffitt suggested the startup cost would be $6 million, mostly for technology and legal fees. It could be run for $1 million a year, he said.
Developing a stock market would bring together companies from Berks, Cumberland, Dauphin, Lancaster, Lebanon, Perry and York counties.
“Local participation is key,” Proffitt said.
Local business groups, including the Lancaster Chamber of Commerce and Industry, the Community First Fund and the Susquehanna Sustainable Business Network have expressed support for the concept.
Dan Betancourt, president of the Community First Fund, a Lancaster-based organization that helps entrepreneurs start and grow their businesses, said the concept of a Lancaster stock exchange shows promise.
“This would help the local business owner. They can use this market to strengthen their business and raise capital,” he said.
Will investors consider putting money into the Lancaster stock exchange? Proffitt thinks they will if they know it will grow local companies that they know and can see. When those companies grow, they create jobs. That, in turn, benefits the community, he said.
“For every dollar invested in a local company as compared to a global firm, the economic multiplier is huge. If you give Wal-Mart a dollar in investment, you create a low-wage job in China. You give a local company that same dollar, and it goes to the wages of your neighbors, which in turn is donated to your church, and used to pay local taxes to support schools and buy from local stores,” Proffitt said.
It would take about three years to set up a Lancaster stock exchange. The exchange would have to convince small-to-medium-sized local companies to go public and issue stock, while at the same time assuring the U.S. Securities and Exchange Commission that the exchange is bona fide and has adequate protection for investors, he explained.
“The real challenge is sufficient participation in such a market,” said Proffitt. “On the one hand, will companies that have not previously issued stock want to do so? And will local citizens, suspicious of Wall Street, put some portion of their money into this market?”
Success, Proffitt suggested, would be trading 10 companies’ stock locally. If local investors dedicated just 1 percent of their portfolio to the Lancaster Stock Exchange, it would be successful.
The next step, he said, is to get input from regional business and political leaders and determine whether local businesses would be interested in participating.
