We will See about my Crystal Ball.
And Erm. Mate. Frontier is a Company on Shares.
Its worth about 13 Bucks right now. It once was over 30 Euros.
After Odyssey the Investors withdrew Funding like Crazy.
And it keeps Dropping.
You obviously
DO NOT UNDERSTAND how
business works... Fortunately StuartGT fills in some of the blanks for you in the following post:
Share price != funding
FDev have around £40m in the bank, and don't pay dividends. The only times Share Price correlates to funding is when new shares are issued and sold, and if FDev decide to take loans/credit based on their market cap
Nice little crash course there Stuart, I hope you don't mind if I expand on it a little bit more?
Market Cap - short for Market Capitalization is the company's value, which is the number of shares issued multiplied by the price of the shares. In FDEV's case this is ~39,420,000 shares at ~£11.70 each means the company is valued at a market cap of ~£462,000,000. When those shares were at ~£32.50 per share, the much vaunted pre-odyssey share 3,250 share price. That £32.50 per share times the 39.42M shares issues translated to a "market cap" of £1,281,143,000. But the drop in market cap from £1.282B to £462M / £0.462B doesn't mean £820m has been drawn out of the company's bank account, it just means the shares and thus the entire company are worth significantly less than they were before.
These valuations don't necessarily reflect what the company's asset's are actually worth, FDEV report their total assets as ~£161m, that's bricks and mortar on the buildings, servers / IT / office equipment, and intangibles such as trademarks, copyrights, patents. The difference between actual assets and shareprice are to do with how the markets, more specifically the traders buying and selling shares percieve the company's future earnings, the value of the intellect / skills / knowledge / cohesiveness and performance of the team, and thus how much proffit they can make in the future from either selling the shares or keeping hold of them and getting
dividends. This is called market confidence, essentially when traders see a company as being a good bet to make money from it's future success, they are confident in it.
After the reception to Odyssey, and the blatently obvious fundamental technical problems the game has, suggesting bigger deeper issues with the cobra engine it runs on, they lost a lot of that confidence, and a few big investors, such as hedge funds / pension funds etc, have dumped their share holdings in frontier. You'll have heard of supply and demand, when the market is flooded with people offering to sell their shares, or flooded by one entity looking to sell lots of shares, the price goes down, and that motion is what's precipitated the two biggest divebombs on FDEV stock in the last 12 months. One immeidately after odyssey's problems were quantified and understood by people more influential than us daft gamers, and another when Frontier had to issue a proffits warning basically saying "sorry shareholders, we ain't making as much money this year as we thought we were going to", meaning there would be less or no dividends.
Dividends are are something managed by the board of directors, and are best thought of as a share of the proffits, or
a portion of the company's proffits paid out to each and every share. At it's simplest, if FDEV made £19.5m this year, and have 39m shares in the wild, each share could get a £0.50 dividend, literally a share of the proffits. However, boards don't always pay their full proffits to the shareholders, instead they might decide to invest some of the proffits in growing the company, or to sandbag some of the proffits to keep significant cash reserves on tap. So if in this scenario FDEV decided to keep half their proffits for company use, they'd have £9.75m proffits to split up as dividends amongst 39M shares issued, leading to £0.25 per share. If you owned a thousand shares, currently an £11,170 investment, you'd get £250 dividends. However, if the company announced that they'd spent £5m of that £9.75m proffits retained to buy the games rights for an upcoming blockbuster movie,
market confidence would grow and the share price might tip to £13.50, so your investment would grow in value from £11,700 to £13,500 + your £250 dividends, you've now (potentially) made £2,050 [ (£13,500+£250)-£11,700 ] a ~17.5% return.
Similarly, with those same numbers, 39M shares in the wild, of which you own 1,000 - still an £11,700 investment, they make the same moves, £19.5M proffit, keep half of it (£9.75M) and reinvest £5m in the same blockbuster license, the share price could take a wobble if investors had anticipated higher end of year proffits, or higher dividends, or don't see the value in the new game tehy splurged £5m on the license to make. In that case if they vote with their feet and exit enmasse, selling their shares, driving the price downwards, to say £10.25 your investment could tumble from £11,700 to £10,250, take some of the sting out of it with your £250 dividend, it's now a £10,500 position, netting a £1,200 loss, just because others didn't like what the company is doing.
That last paragraph / scenario is more closely aligned to what is happening with Frontier's shares just now, but even though there was massive swings in both directions modelled there, neither scenario fed into the company's bank balance.
