| Author |
Thread Statistics | Show CCP posts - 0 post(s) |
Sun Win
Mutually Assured Distraction
   |
Posted - 2007.03.05 06:24:00 -
[1]
I would like to buy 100 shares. Isk has been sent.
New to Eve? Learn to Fly - join channel: "Eve University" or read here |
Sun Win
Mutually Assured Distraction
|
Posted - 2007.03.10 16:24:00 -
[2]
Edited by: Sun Win on 10/03/2007 16:24:07
 Quote:
Dividends *will* be paid. The only portion of isk that investors will not see is that which would go to unsold shares. That isk will stay in the corp wallet, raising the base value of all shares (both sold and unsold).
The other two options I can see are to have the corp purchase shares in itself, or to modify the dividend in such a way that unsold shares are not paid. If one of these other options--or some fourth option I had not considered--has the support of the community, I'd be happy to do that, instead.
Not an accountant so I'm trying to wrap my head around this. I think that issuing a dividend in the way that you suggest penalizes current investors by allowing future investors to buy shares as a discount.
Here's the math as I see it with easy numbers:
You IPO 2,000 shares at 1ISK ea. on a company with no current assets.
Half of them sell.
--Company net worth: 1,000 ISK.'
--I get 10 of them. Value of my investment: 10 ISK
Company does business and realizes 20% profits.
--Value of company: 1,200 ISK
--Value of my shares 12 ISK
You issue a dividend for 100% of those profits to both the current and unsold shares (so 0.10 ISK/share)
--Dividend paid to investors: 100 ISK
--Dividend reinvested: 100 ISK
--Value of company: 1,100 ISK
--Value of my investment 11ISK + 1ISK cash = 12ISK
So far so good.
News of your excellent business sense reaches Eve, remaining IPO shares are bought at 1ISK each.
--Value of company: 2,100ISK
--So shares are actually worth 1.05 each
--Value of my investment: 10.5 ISK(!) + 1ISK cash
--Newcomers are now buying 1.05 ISK shares for 1ISK.
I am not sure if my reasoning is right here and I welcome comments and corrections but it seems to me that issuing a percentage of the dividends back to the company on unsold shares is in effect subsidising future share purchases and my expense (unless I also buy up lots of future shares  ).
New to Eve? Learn to Fly - join channel: "Eve University" or read here |
Sun Win
Mutually Assured Distraction
|
Posted - 2007.03.11 00:22:00 -
[3]
Originally by: Braendig
The person buying new shares will be recieving shares worth 10.5 million ISK for the bargain price of 10 million ISK, but they will not have recieved the 1 million ISK dividend. This in no way affects your share value.
Here's where I get confused. See if this other person HADN'T bought those shares then my shares would have been worth 11 million (the company was only worth 50 million +5 million = 55 million/5 shares = 11million/share). Then when these other people bought their shares their 10 million investment jumped to 10.5 instantly while the value of mine fell from 11 million to 10.5 million. In this scenario, half of the reinvested profits, which were realized off of my investment went to investors who had not yet invested.
That doesn't seem right.
New to Eve? Learn to Fly - join channel: "Eve University" or read here |
Sun Win
Mutually Assured Distraction
|
Posted - 2007.03.11 17:12:00 -
[4]
Edited by: Sun Win on 11/03/2007 17:13:36
It seems to me that when the company issues a share it doesn't magically gain value. A share has no value until its been bought. It gains value due to an injection of ISK into the company when someone exchanges ISK for a share. Otherwise when TINY. created the 25,000 shares then suddenly the company magically gained 25bil in assets.
At any rate, I fear taking this thread further off topic which is the IPO itself. So I'll let the matter lie and wait for a comment from MP.
EDIT: actually if the dividend will be paid out using the formula on page 3 of the prospectus then all is well.
Also, I'd like to reserve an additional 50 shares. I'll try to transfer the ISK before the weekend is out.
New to Eve? Learn to Fly - join channel: "Eve University" or read here |
| |
|