Imagine being able to buy and sell shares of local companies such as Isaac’s Deli, Chestnut Hill Cafe or Wolfgang Candy. Soon, you may be able to do just that.
Working with seven Franklin & Marshall College students, Trexler Proffitt, assistant professor of organization studies in the Business, Organizations and Society department, is exploring ways to bring a local stock exchange to South Central Pennsylvania. The Lancaster Sustainable Enterprise Stock Exchange (LANX) would encompass the Lancaster, York, Harrisburg and Reading areas, making it possible for small investors to buy equity in the region’s privately owned companies.
“There currently is no easy way in the U.S. to invest locally,” Proffitt says. “We’re trying to change that. We’re arguing for a totally different model that would allow you to put just a thousand dollars into the restaurant or business down the street, and then trade it. The amounts involved aren’t millions of dollars, and you don’t need to be an accredited investor to do it.”
According to Proffitt, this finance model dates back to the early days of this country. When Americans would settle in a new city such as Pittsburgh or Cleveland or Chicago, they would create a stock exchange to fund local businesses. It is the same model that helped to build up companies such as U.S. Steel and Bethlehem Steel.
“There is a rich history of stock exchanges supporting economic growth in America through the 1920s, until the Great Crash put an end to the founding of new ones,” Proffitt says. “We haven’t started a new local stock exchange of this type in 80 years. We don’t know how to do it anymore, and I’m talking about rediscovering that capability.”
Proffitt explains that a local stock exchange would help to eliminate the funding gap that occurs when a business goes beyond the startup phase until it reaches the point where accredited investors begin taking a look—at about $10 million. For business owners, this would be a valuable source of funding for expansion. For investors, it would create a way to invest in small companies that could one day, potentially, hit it big.
“You could invest in Wolfgang Candy down in York, which has a neat strategy for custom chocolate distribution.” Proffitt says. “Talk to the folks who work there and own the place. Now you’ve got a really good basis to look over the investment documents. If a business is good locally, why not buy from them and why not invest in them?”
Franklin & Marshall students have been volunteering their time to make the exchange a reality. “I’ve never seen students work so hard,” Proffitt says of seniors Jackie Addeo, Danny Coffman, Geddes Dowling, Glen Halperin, Claire Myers and Jeannie Zouck.
Robert Pokora ’11, the only junior involved, says it has been a valuable experience. “I’ve learned about SEC regulations and how to apply for grants from private foundations and the state,” he says. “I’m learning the lingo of the business world as I pitch our idea to local officials and large investors.”
Over the summer, three of the students went to an international social entrepreneurship competition in Segovia, Spain, where they presented the project and captured second place.
“One of the best parts of attending a liberal arts college like Franklin & Marshall is that students are given these amazing opportunities, and we take them into our own hands and make the most out of them,” Zouck says.