General / Off-Topic Frontier DEV any Market investors?

[Cosmo Bozo]

I don't get this about shares. How have you made a profit? You haven't made a profit until you sell them, surely? or you get so much of a dividend that your initial investment is repaid and then some?

Personally, if I wanted to risk anything, I'd prefer to build a company and sell it, than invest in someone's company.

Well he said showing a profit, which is a bit different from saying made a profit, yeah he'd have to sell them.

but buying 3700 FDEV shares is a much smaller risk and of course far less work than building a company and selling it. You can't build a business in the spare 5 minutes it takes to buy some shares.

 

[Patrick_68000]

I think anyone who reached the Elite status in the game, should receive one free share of Frontier.

 

[Mars]

I wrote this for another post, but it might be helpful to a few people on this thread.

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The stock is trading on AIM, which is the junior version of the London Stock exchange, this is a suitable market for the company is it is a low cost environment, but also means there will be a greatly reduced number of institutions and analysts looking at it. This could be an opportunity for us to pick up overlooked shares, but could equally mean the shares slump for extended period making it difficult to sell at a value you feel is justified.

It launched on this market back in July this year at 127p per share and has a total of 31,156,892 shares valuing the company at launch about £40m. That value has swung since between a low of £29m and a high of £51m. However, I should point out that valuations on AIM can often be rather illusory as so few shares get traded. I expect at the level of a private individual you could buy a few hundred pounds of shares at most levels, but a larger order my not be filled at those prices.

To compare the valuation of the company to something we can look at the results for their 2013 year which runs from April 2012 to May 2013. Here we see they had total sales of £12m and made a profit (EBITDA) on that of £3.6m, although that figure has been adjusted to remove certain costs around the floatation.

On simple terms then you could say that at the current valuation of £47m the company is able to earn £3.6m, or simplistically, pay for itself in 13 years. This is a fairly average multiple for an average quoted stock. Although much higher than you would pay for a business privately, say if you were buying a local business in your home town.

Again in simple terms I find that a fairly full valuation and feel no need to rush to buy shares. That said I wish I had noticed when the value dropped to just 29m, I would have immediately bought £10k of shares personally if they were there to be had.

However, the important thing to remember here if that Frontier is a business that is changing its business model. They are moving from a company that makes games for other people, to a company that is making their own game, ED. So the above figures are for the old business model, not the new. Albeit the money raised through kickstarter is going through the accounts so is boosting revenue.

When ED is launched, if successful could be a step change for the company, and after seeing the quality of the Alpha, I’m sure it will be. Although I have not taken the time to run any projections on what that might mean for the company in terms of revenues or profits, I don’t think I have the information to do that correctly.

Not that I am giving anyone advice, but if you did buy shares at the current price I hardly think you are doing anything foolish, not if you have faith in ED. That said, I will still be watching for a lower price before taking a position myself. I think I will acquire shares before the games launch, but feel no need to rush, there is plenty of time before then and I can pretty much guarantee that no matter how good the alpha and beta goes, no one in the investment industry will pay much attention until the game launches and actual sales figures emerge. This gives us fans plenty of time to take a leisurely view of how good ED will be, and plenty of time to buy shares if we wanted.

If you wanted to read more about the company its easy to do so here: http://www.investegate.co.uk/Index.a...e=3&words=fdev

 

[Patrick_68000]

To simplify the process, they should propose the shares in the new store

 

[OillyRag]

Thanks mars good post

 

[Mars]

Thanks mars good post

Thanks for the rep

 

[Stachel]

355 shares bought at 150.5 iirc. Normally I would not have bought in at the top of a peak lol but I'm playing the long game on these. The idea is that I make enough to cover the cost of the game and expansions ..

 

[AndrewF]

I don't get this about shares. How have you made a profit? You haven't made a profit until you sell them, surely? or you get so much of a dividend that your initial investment is repaid and then some?

Personally, if I wanted to risk anything, I'd prefer to build a company and sell it, than invest in someone's company.

True, I should have said, If I were to sell them, I would make a profit.

 

[Kroy]

You can't build a business in the spare 5 minutes it takes to buy some shares.

Indeed. I don't understand much about buying and selling shares. It seems odd. Companies cannot continue to grow indefinitely so the entire system seems very short-term in its outlook. I'm sure it has some advantages to someone, probably the fat cat city investors more than anyone, but how does it benefit the company beyond providing a means to cash in at the end of a decade or so of work and effort?

Does a company get a percentage of each share that is sold, every time it is traded?

 

[Mars]

Does a company get a percentage of each share that is sold, every time it is traded?

The purpose of the stock market is primarily to allow people to buy and sell shares, it provides an exit route for people that already own the shares, and from the company point of view can sit at the end of the initial funding process.

I used to be an AIM fund manager (FDEV is quote on AIM), but have since moved into venture capital. My job is to look for new ideas and if they look viable, and likely to succeed then give them the financial backing they need to start up, grow and develop. However, venture capital would not exist (at least not at this scale) if we were not able to sell our companies one day and move onto supporting the next small business/idea that needs our help.
What the stock market does is allow firms that have become viable (so after the Venture capital stage) to float, so its shares are now no longer traded between a small handful of individuals and VC’s like me, but allow anyone to buy and sell. This gives the VC cash back to work on the next thing and can give the founders and employees of the business an ability to sell part of their holding and go buy themselves something nice, or start their next business.

So no, the company does not get a % of each share, but the Stock market does serve a vital function of providing liquidity, and is a necessary part of the business funding ecosystem.

Indeed. I don't understand much about buying and selling shares. It seems odd. Companies cannot continue to grow indefinitely so the entire system seems very short-term in its outlook.

I don't understand what you mean by this bit ??

I'm sure it has some advantages to someone, probably the fat cat city investors more than anyone,

I could probably do with losing a few Kg’s I’m sure, but I regret I am not a Cat. Which is a shame, it could be fun.

 

[Yaffle]

Indeed. I don't understand much about buying and selling shares. It seems odd. Companies cannot continue to grow indefinitely so the entire system seems very short-term in its outlook. I'm sure it has some advantages to someone, probably the fat cat city investors more than anyone, but how does it benefit the company beyond providing a means to cash in at the end of a decade or so of work and effort?

Does a company get a percentage of each share that is sold, every time it is traded?

Well, it serves a few purposes.

First of all the idea is that the company is a legal person. That's important as it allows it to own property, be sued and sue in its own name. Moreover it protects the owners (shareholders) from losing their houses should it all go horribly wrong. If you are a sole trader you ARE the business, so should you go bust it's YOU personally that suffers. With a corporation it's the artificial person. As a shareholder you have no further liability.

Shares help with succession. If you owned unlisted shares and wanted out you'll have a painful process to get them values and sell up. With listed ones, you call your broker.

Once issued the company itself (as in the bit of paper, not the directors or other employees) has no interest in the share price. The company issues them to raise capital, called equity capital, usually in the form of cash. It then spends that cash doing things to make profit and more cash. When a share is traded on the market the company gets nothing. Just like if you sell your car to Jim Smith then Ford gets nothing from that deal, the car is already out there and sold.

Directors DO have an interest - namely self-interest. They are often remunerated on the basis of shares, and as they have to be voted back in by shareholders from time to time they obsess about keeping shareholders happy via share price or dividends (the two are linked, sort of). They can get them cheap (via options) or they may own them already (like Bill Gates for example) as being an initial shareholder. So pumping up the share price increases their personal wealth.

 

[Kroy]

Thanks for the reply, Mars, very enlightening.

So short-term trading doesn't benefit the company in any way? In fact, it could harm a company if people wanted to offload shares quickly at a lower price?

As with any system, there will be people who extract maximum possible advantage for the smallest of effort. At least you, in your position as a VC, put your money where your mouth is.

Thanks too Yaffle, it does make more sense for the company. I guess the issue is that the system is what we're stuck with. No one wants to think of anything different because there is too much money tied up in it, and so the system continues to roll on.

If we had to start again with this entire thing, would we do it the same way?

 

[Mars]

So short-term trading doesn't benefit the company in any way? In fact, it could harm a company if people wanted to offload shares quickly at a lower price?

In theory the two are separate. The company will do what it does irrespective of share price movements. The trade in its shares is a matter for the owners of the company, not the same thing as the company itself. That said the people running the business do answer to the people who own the business so management want to grow the share price as this will unlock greater remuneration for them. If the share price dropped suddenly then the managers would start getting angry calls for owners and that might prompt a change in strategy. However, this effect will be dampened in FEDV as David Braben owned 56% of the company at launch. Investors will look at that as a positive and a negative, his interests will be aligned with theirs, on the other hand, he ‘could’ be a bit of a bully with that much clout and not work in the interests necessarily of other shareholders, although as I said before I intend to buy at some point, so this is not something I am massively concerned about.

As with any system, there will be people who extract maximum possible advantage for the smallest of effort. At least you, in your position as a VC, put your money where your mouth is.

No we are exactly the same, we want the maximum reward with minimal effort. If we could just buy winning lottery tickets we would do that. However, such an approach is highly erratic and usually the only reliable approach is to work very hard, and develop an impeachable reputation for honesty so that everyone wants to work with you and you still have a job in ten years’ time.

Of course in finance we do get the occasional criminal, or rogue pop up from time to time. These people quickly get shut out by those of us trying to make a living this way, but invariably these rare bad apples end up getting held up by lefties as prime examples of city types, as if there has never been a union man or teacher who has done very bad things.

If we had to start again with this entire thing, would we do it the same way?

The system is always evolving. Currently we are seeing Kickstarter and other crowd funding appear that is a very welcome addition to the ecosystem.

 

[Sir.Tj]

Moved to the off topic section with a redirect.

 

[Evil Michael]

I bought 128 FDEV shares through iweb.com for £200 last year.

Now they are worth approx £340 if I sold today (so approx 70% return).

But I'm hoping that Elite Dangerous will be very successful and the price rises accordingly. I'm planning on using the proceeds to upgrade my graphics card!

I can recommend iweb as share dealer site, it's actually owned by Halifax and they only charge £5 per trade. The main downside is that it takes 3-4 working days to withdraw cash from the site.

 

[Medi2121]

FDEV has recently been listed on the LSE just to keep you informed. Just bought some shares. For those of us who are small investors, stick it in a Stocks and Shares ISA as you pay no tax when you sell them or receive dividends. I use my own bank's on-line stockbroker site as this keeps it relatively simple.

 

[Stachel]

I bought 128 FDEV shares through iweb.com for £200 last year.

Now they are worth approx £340 if I sold today (so approx 70% return).

But I'm hoping that Elite Dangerous will be very successful and the price rises accordingly. I'm planning on using the proceeds to upgrade my graphics card!

I can recommend iweb as share dealer site, it's actually owned by Halifax and they only charge £5 per trade. The main downside is that it takes 3-4 working days to withdraw cash from the site.

I switched to iWeb recently thinking it would be a great way to save 100% on commission fees etc. It surely is IF you trade CREST equities. If you want to buy and sell AIM shares (such as FDEV) which, according to Google, are covered by CREST, for some reason, despite this, you can't use Limit orders to obtain a preferable price and instead have to pay the LSE's Bid/Ask prices. Which are often unreasonable.

For example when I first bought FDEV using AJ Bell's youinvest.co.uk in November last year: I paid £10 commission to buy and £10 to sell (+stamp duty). I was able to use Limit orders to buy and sell on both occasions and avoid the BID/ASK spread.

I bought FDEV with iWeb and had to pay the LSE ASK which was 15p higher than the current share price + £5 commission because Limit orders are 'not available on this stock'. A bad deal sadly. If I wasn't happy to pay that for a long term investment ..

As was mentioned earlier in the thread, it looks good, but in reality they will find ways to fleece you ..

Also don't overlook the £25 account activation fee for iWeb. Again fine if you intend to do a lot of trading. Not so cool if you just want to buy the one stock and hold it for 6 months to a year.

I have also experienced this a few times during the busier periods of the trading day:

Service Unavailable
Our Share Dealing Online Service is temporarily unavailable.
We apologise for any inconvenience this may cause.

If you require assistance, please contact our Customer Care team on 0870 412 7060:

Monday to Friday - 8am to 9.15pm
(Closed weekends and English Bank Holidays)

Which is obviously absolute rubbish if you want do business.

iWeb seems like a good deal if you want to buy/sell a lot of mainstream FTSE stocks. If you work it out over the course of a year you could save literally hundreds if not thousands in commission. Not much use for FDEV though alas. Despite the higher commission, if you just want to obtain FDEV stock and go long, I recommend using youinvest.co.uk. The interface is better, the system just works and its never down.

One last thing, the amount of terms and conditions and stuff from iWeb was just excessive. They basically get you to agree to a credit style agreement whereby they can sell all your info, give it to third parties (including credit reference agencies and HMRC), revise their TOS without notice etc etc. Typical bank crap. When I registered with them within a week I was receiving spam from third parties via email and snail which I am less than thrilled about.