Recent idea I'm going to run with for a bit: a #WorkerCoop revolving matching equity fund.
Basically, the fund will match 1:1 (or more?) the member shares of worker-members of co-op conversions with an investment of non-voting preferred shares. The shares will pay a dividend equal to the WSJ prime rate, the co-op can buy them back at face value at any time. The proceeds go back into the fund to be used for supporting future co-op buy-outs. ♻️
@mattcropp I like the idea. I would put a cap on the dividend though, something like "the prime rate or 4%, whichever is lower" just in case in the future the Fed raises rates like they did in the 70s. That seems pretty unlikely at present, but you never know how things might change.
@mattcropp Ok, a couple of other things. I don't know how/if this would even be possible, but ideally I would like to have the matching funds be forgivable in the case of business failure...which is kind of the opposite of a "preferred" share, I realize, but I wonder if the concept of non-extractive finance could be extended in this way. Also, I think the dividends should not be guaranteed unless the business is realizing a surplus (i.e. like how Eq. Ex. has theirs structured).
1. The potential issue with a specific nominal rate cap is that you probably want the rate to be to be inflation-responsive so the fund doesn't end up melting rather than snowballing larger in a late '70s/early '80s inflation.
2. My sense is that they would be subordinate to everything but the member equity, and members would not personally be on the hook to pay it back.
3. To dividends, my sense is to allow the co-op to, at the board's discretion, defer dividend payments to a later date, but tying them to surplus would be a bit more flexible. Basically the dividend needs to be paid before any patronage is paid.
@GuerillaOntologist One other approach to dividend rates might be to have them escalate over time to encourage the co-op to buy back the shares so the funds can be paid forward to the next co-op conversion.
Y1-Y3: Prime - 0.5%
Y4-Y6: Prime + 0.5%
Y7+: Prime + 1%
@LeoSammallahti @GuerillaOntologist Just took a first swing at a 1-page summary of the fund idea: https://docs.google.com/document/d/1uQ_dYq5gmivzj2xk2zOD7P-DhO0T_yh7rSkjGVy2cdo/edit?usp=sharing
Refined it a bit more after a bunch of feedback. Ended up dropping the deferred dividend bit entirely, and added matching to member preferred as well as voting shares, which encourages those member who can to contribute more equity.
Gonna submit the grant application on Friday to our food co-op asking for $7,500 towards this... 🤞
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