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By Xavier Mohr, SLReports.net An Editorial In a stunning nine-point post yesterday, L&L Bank and Trust (CapEx: LNL) CEO Lindsay Druart announced ambitious expansion plans that include the opening of a stock brokerage and global exchange at the bank's website, myllbt.com. "The brokerage division is now L&L Bank and Trust Brokerage Exchange," said Druart. "Investors will openly trade LLBT’s portfolio on our enhanced website... this will be one stop shopping for all investment needs." Druart says that companies not currently in the portfolio may be bid upon by investors through their enhanced trading system, at which point shares will be purchased by LNL from the applicable exchanges. Dividends will be paid to investor's accounts in the same way they would be at the respective exchanges. An interesting twist to LNL's brokerage idea is a vague mention of "specifically-targeted funds and indices" that will be created to trade at the bank's website. An interesting note of this nature also appeared in an announcement from L&L Credit Reporting Agency and Business Services (CapEx: LCA).
"We currently have a few companies we are working with to introduce to the market," Druart said in the announcement, speaking also of the upgraded software at llcra.com, which now includes "CEO" and "Trades" links in the top menu. "Our first candidates for IPO Inclusion will be introduced to the market within the next two weeks," added Druart. "... currently, we are solidifying business plans and 90 day action plans for these businesses." In appearance, it would seem the missions of LNL and LCA are synergistic. LNL operates as a stock brokerage for trading various stocks on various exchanges, utilizing the same programmer of AVIX, CapEx, and ACE to create sophisticated software for doing so. LCA will not only serve as Second Life's premier credit reporting agency, but will assist companies in going public, helping them IPO on the various exchanges... or perhaps even IPO'ing them under their own software for later trading at LNL. Much is still unclear as the new LNL and LCA software slowly transforms and explains itself to potential customers. The announcements fall short of explaining one burning question among Second Life traders... with these recent developments, will we see the first Second Life brokerage and IPO underwriter, or – in essence – will we see the sixth exchange? LNL and LCA will compliment each other well by each serving one key function of a Second Life stock exchange... IPO a company at LCA, trade its shares at LNL. Will Second Life investors take to the ideas, or will they turn away? To me, all of this is very 'third-party'. Not only are the LNL and LCA investors subject to each entity's deposit reserves, but are also subject to the reserves of the original exchanges. They are also subject to relations between the organizations and the exchanges. As well, in the unfortunate event that LNL or LCA failed, all exchanges would have an explosive situation on their hands. Former customers would turn to the original exchanges for the dissemination of the companies' portfolios. The exchanges would then have to distribute their shares – stock by stock – to hundreds of different investors... some of which may not have accounts. Listed companies would also be faced with LNL or LCA no longer being a top or majority shareholder and fight with requests for board membership from shareholders they've never even met. All shareholder lists would be dramatically altered at same time. A failure of LNL or LCA would bring the entire Second Life market to a screeching halt... even if they hadn't been all that successful. Failures of individual exchanges would also throw wake at LNL and LCA. The companies' investment balances with said exchanges would be instantly obliterated. Assuming that LNL and LCA could survive the hit, trading prices and volumes at the home websites would go haywire as companies moved to different exchanges, each operating in new or different trading environments. Panicked sell-offs would either lead to trading halts at LNL or LCA, or runs on their respective finance avatars and ensuing liquidity issues. The list of possibilities goes on and on here. What happens if LNL's or LCA's accounts are locked at the exchanges because of poor or strained relations? It would be much along the lines of an exchange failing, at least in its impact to LNL or LCA. The ideas Druart proposes do, however, feed two sincere hungers of not only SL investors, but all web junkies period: simplicity and consolidation. Make it easy for investors to trade all the companies in existence in SL by combining them all in one or two websites. Not a bad idea... now I get to delete five bookmarks. But this is going to be an idea that will have to prove itself fast if it wants to catch on. L&L Bank and Trust Brokerage Exchange will need to generate a lot of trade volume really quick to attract customers, since most savvy investors will cringe at the thought of having Linden Dollars locked away in an unmoving order at a bank with notoriously low interest rates. In addition, this network will need – for long-term success – to attract new investment clientele that are not currently investing at the exchanges. I regret that if only existing SL investors are targeted as customers, that the entire system will suffer from horrendous volume and therefore fall to the very bottom of the Second Life stock exchange barrel by simple default. Attracting new or unlikely investors by touting increased security or simplicity would be a key tactic here. Failing to do such would simply mean the system's trade volume was subject to the volume at the original exchanges, subject to the interests and finances of those exchanges' original first-hand investors. LNL and LCA must create new interest with this system, not rely on traders already experienced with the original markets. In short, Druart will have to prove herself as a market maker, not a third-party trader. This entire operation also appears it might be a bit steep to finance. Not only will LNL be paying interest on traders' accounts, but will be investing in other financial institutions, as well. The system will require non-brokerage profits to generate a vast amount of cash liquidity. One key in profit generation no doubt lies in LNL's "specifically-targeted funds and indices," which would seemingly be subject to the same curse of requiring new or unlikely investors. And aside from everything else, can they generate double-digit percentage returns that may be needed to keep the whole thing afloat? While I like a lot of the ideas behind LNL's and LCA's bold plans, I just have too many questions about important aspects of the business to really get all that excited right now. If this catches on, if it is fed by new investment... this could be good for all of us. There are, unfortunately, a lot of factors involved that make slow performance or failure of these new ventures a higher probability than the hype would have you believe. As an investor, I think the safest bet for me right now is to wait for the IPO of Tango 11.
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