Stock Market implementation

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Topic created : 8.11.2010, 17:36

franciscojrcosta

Atlantis Ltd

I've read a topic where someone mentioned Stock Market implementation.
I would really like to know if there is any chance of stock market implementation in the game, and what should be the rules of stock market.

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9.11.2010, 02:49

austenbosten

To date, the admins say that they are planning a Virtonomics Stock Exchange. Companies worth over $10 billion in assets will be able issue up to I believe either 20-25% of their company in stocks. All players will be able to purchase these stocks in hopes of capital appreciation.

I still think it's highly flawed and a Bond Market would be much suited for this game.

9.11.2010, 18:41. Subject: Conditions to be in the stock market

franciscojrcosta

Atlantis Ltd

Personnaly I think that the requirements for a company to issue stock should be similar to the following:

- Positive cash assets at the date stock was issued.
- Having $100 000 000 (one hundred million) in assets value at the date stock was issued.
- Having at least 5 points (this means that the company manager has the possibility of converting points into money, therefore the company is more credible when facing market difficulties. 5 points = $25 000 000)
- Stock could be issued up to 40% of the company assets value.

9.11.2010, 22:06

Yerka

Yerka International

I don't think points should be a requirement, if plans for a Stock Exchange is to be implemented. $25 million doesn't take you very far in terms of investments.

Maybe a requirement to maintain a minimum amount of cash-on-hand would be better.

10B in assets is also better because it indicates that at least the player/company had stayed (with the game) long enough to grow his/her company and had figured out most of the dynamics of the game.

10.11.2010, 04:58

austenbosten

Problem is, most $100b companies means that players playing that long might tire of the game and leave. I would say a bond market would be better, because lets say a player decides to be irresponsible and quits the game without closing their account, the stock would tank to zero and for those who unfortunately held stock and maybe didn't come online for a day or two would find their investments wiped out.

A bond market would prevent this, as the investor becomes the creditor and has liquidation rights when the company is liquidated of their assets. Stock owners have no or little rights to assets (if they are preferred stock they get more rights to the company assets than regular stock, but only after bonds).

Also I made a goof, I think it's companies with $100 billion in assets that will be able to issue stocks not $10 billion.

10.11.2010, 12:51. Subject: Bonds instead of stock market

franciscojrcosta

Atlantis Ltd

Bonds instead of stock market is a much more safe alternative, and I agree with the reasons pointed by Austenbosten.

10.11.2010, 16:37

austenbosten

Here is a convo I had on another thread...

[You can expect stock market to appear next year, where all companies with asset over $100 bil can issue shares up to 25% of the company value to finance its operation. Hopefully, all the smaller companies will buy them as a long-term investment.] ~ Virtonomics Admin

23 October 2010, 22:32

really, that sounds like the opposite of a stock market. Stock markets are a vehicle for companies to raise cash by selling shares of ownership. It is really designed for the smaller companies to gather capital to expand instead of getting loans, the only reason large-cap companies would go public, is if they are desperately short of cash (either overextended or the business is faulty and they need the capital to reinvigorate the company). It would make more since to set the bar lower on who can go public, perhaps companies with assets more than $1 billion.

Investors will not make money on such a large company, since the ability for that company to expand will be weaker than that of a smaller company, or worse the larger company is more likely to downsize due to a recession, which would kill shareholders investments. I don't want to sound like a whiner, but if that's what Virtonomics plans for a stock market, there might as well not be one.

I understand that the Admins might fear that newer players raising too much capital too early will deter them from playing long-term. However small companies buying "blue-chips" will make little or no money on stock appreciation, therefore they will not spend the cash on stocks from companies that expand poorly compared to $1b>$10b companies, so the stock market feature will be purely novelty and will have terrible participation from players if they see little gain. (Basically players would rather open a retail store and make a couple of million in a few weeks, than buy stocks in a company that will hardly appreciate) In RL people only buy "blue-chips" for stability and security reasons, they never buy them for capital appreciation.

So what I propose the admins should do, is either lower the restrictions to companies issuing stocks to at least $1b>$10b or if the Admins want to only allow $100b companies to issue securities, get rid of the stock market and create a bond market.

There large-cap companies can issue bonds, and small players are guaranteed at least a stable income. Therefore with a bond market, small-cap players will be more likely to purchase bonds rather than stock.

I don't mean to dictate, but I see a lot of potential with the stock market and too see it restricted to only large-cap companies would just make the feature pointless.

Also if you are creating a stock market/bond market, will we see a Capital Gains Tax?

Thanks

10.11.2010, 18:55. Subject: Bond market is rigth for virtonomics

franciscojrcosta

Atlantis Ltd

Stock Market vs. Bond market

Stock Market

1- Player A buys stocks from company B = player A takes ownership of company B in the percent of the stock he owns. Player might have rights to manage the company if he holds more than 50% of the company stocks.
2- When company B issues stock = dividing the company for the stock holders.
3- Company B decides if stock holders will receive dividends or not.

Bond Market

1- Player A buys bonds from company B = player becomes a company creditor, player won't ever have rights to manage the company.
2- When company B issues bonds they are financing themselves without the need of a bank loan.
3- Bonds have a lifetime, and company B has to pay interest to player A for the bonds he holds at each bond lifetime period.

Conclusion:
Bond market seems to be the right concept for Virtonomics because players aren't supposed to take ownership of other players company, bond market does assure that.

11.11.2010, 21:14

austenbosten

Exactly my point franciscojrcosta....however the admins were not planning to allow a company to issue stocks beyond 25% of their company, so company takeover will be impossible.

As for a stock market, it could work for Virtonomics but there needs to be serious changes to the plan.

- Companies would be allowed to issue stocks if the company is valued at or over five-hundred million dollars.

- Companies would be allowed to issue up to 40% of their company in the form of stocks

- Companies would be allowed to offer dividends on their stock

- Companies issuing stock will have to offer a weekly (Real Time) prospectus to their shareholders
(This should be automated which will show the "article" portion of the Finances page; along with a page showing activities as in: creation of new subdivisions with in the last month, the selling of subdivisions, the closing of subdivisions; in addition there will be a comments section on the page for the company owner to write about whatever they want their shareholders to know.)

- Any player with an account in Virtonomics can purchase these shares

- Players purchasing stocks will have rights to the equity of the company issuing the stock, yet will hold no rights to the companies assets during the liquidation phase in the event of a bankruptcy.

Bond Market

- Companies would be allowed to issue bonds if the company is valued at or over five-hundred million dollars

- Companies would be allowed to issue up to 40% of their companies assets in the form of bonds

- Companies issuing bonds will offer a monthly (Real Time) prospectus to their bondholders
(This should be automated which will show the "article" portion of the Finances page; along with a page showing activities as in: creation of new subdivisions with in the last month, the selling of subdivisions, the closing of subdivisions; in addition there will be a comments section on the page for the company owner to write about whatever they want their shareholders to know.)

- Any player with an account in Virtonomics can purchase these bonds

- Players purchasing bonds will have no rights to the equity of the company issuing the bond, yet will hold rights to the companies assets during the liquidation phase in the event of a bankruptcy.

- Companies issuing the bond must offer an Indenture, stating the formal agreements of the bond, to a prospecting investor stating the terms and agreements of the bond along with the rights of the bondholder and the duties of the issuing company before an investor purchases the bond.

There are more rules, but it will have to depend on what type of bond/stock Virtonomics will allow, so for now this is just the bare-bones basics.

16.11.2010, 18:31

Last time edited : 16.11.2010, 18:32

Mr_Stark

IMO stock trading is open to too much minipulation on the part of the CEO as in real life.

I think bonds would be better and perhaps a credit rating calculated from Asset value-expences.

It maybe a good idea to also have a bank that can loan money at interet and set the players corporation credit rateing for bond issues. Perhaps an option to sell bonds to either the bank or players.

This will have to be calculated though so it do not destroy the game.
If the producers and opperators can not make money themselves then the game will die because it costs real money to run and administer/develop/debug ect ect ect.

Maybe it would work in paid subscription realm.

16.11.2010, 19:07. Subject: Bond market

franciscojrcosta

Atlantis Ltd

An entity like a bank operates in a very complex way, and it can handle so many processes that I think its complex enough that its quite hard to implement in a game like Virtonomics. I also don't see the need for banking.

16.11.2010, 19:13

Last time edited : 16.11.2010, 19:41

Mr_Stark

Yes in the real world they do opperate in complicated ways,so much so that most of the bankers dont understand their own products(cough).
Then so do stock markets and the relationship between the clearing houses the broakers the traders and investors.

None need to be complicated,but that is the way they have evolved.

A banking/bond system would be much easier to programme and implement than a equity tradeing system and database.

an example of how the system of stock tradeing could be abused:
Company A is worth 10 Billion but competes with company B
Company A sells 25% of its stock to company B
Company A starts moveing product to company C (brothers account)
Company A goes into reciervership
Company C has all the liquid assets of company A + (any businesses and technologies sold to company C for Kopeks (pennys/cents) + 25% of its value in cash from company C whom was its main compeditor

Adendum:
It could be used to bring a compeditor down,not just as a means to secure investment funds.
Which bring me to this point,if your company is worth 10bil what the hell you need to sell equitys for?
All the business in the stock markets of the world would love to own all their shares (companys= CEO'S) but when the company was floated it was to raise the money they needed at that time.
The stock market and privelages of company directors and ceo's and majority stakeholders are too complex to go into here and you would most likely need a degree in economics just to understand them,let alone the opperations of.

As i said n my 1st post "Maybe it could work" but it would havew to be open to every company even noobs. (but this will result in less game points being purchesed,which is why i said maybe it would work in the paid subscription realm)
And limit the amount that large cap companys can float to say 5%

And i wont even go into options & short selling.

18.11.2010, 05:39

austenbosten

I completely forgot to factor clone companies. Yes a stock market would be disastrous if left without a regulatory body. I completely didn't factor insider trading.

A stock market would only work if a regulatory body was created to enforce rules against: naked short selling, insider trading, ect.

Yeah, I was right the first time..Scrap the Stock Market, go for a Bond Market

18.11.2010, 14:16. Subject: No way for stock market in virtonomics

franciscojrcosta

Atlantis Ltd

Right on the bullseye, a stock market could be a real mess for Virtonomics world. In the real world stock market is regulated.

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List of forums -> Main forum of the online business game "Virtonomics" -> Stock Market implementation

List of forums -> Main forum of the online business game "Virtonomics"-> Stock Market implementation