Inflated IPO valuations = Lower Dividend Pay Outs



  • There is often disbelief at how Football Index value a player during IPO.
    Completely average players inserted at stupidly high prices no rational trader would pay.
    Tonight this strategy almost paid off big-time for FI.

    With just 15 minutes of gameplay left in the day, Ruben Garcia was on course to win starman beating Kevin de Bruyne. (Fortunately Sergio Ramos and Rodrigo de Paul have beat him to starman and best mid, respectively)
    Ruben Garcia (who?) was IPO'd on 22nd Jan 2020 and ended that day at £1.18. Garcia won star man on 24th Jan (bronze day) and FI paid out £288. At 4p per share that means there were 7,200 shares in circulation.

    His price has been virtually flat since then and had he won star man today (silver day) FI likely would have paid not much more than £500 in dividends.
    KDB last won star man on 26/02/20 (bronze day) and FI paid out £31,500 = 787,500 shares in circulation.
    Potentially there are fewer KDB shares in circulation now than in February but at a rough estimate there are 100 times more shares in KDB than Ruben Garcia right now and Football Index would therefore have saved themselves over £60k in dividend payouts tonight.

    When demand outstrips supply, new shares are created in a player. The more shares that are in circulation the more dividends FI has to pay out. The 'risk' team knows exactly what it is doing: they deliberately flood the platform with average players at inflated prices. Demand from traders is low therefore few shares are in circualtion, leading to FI paying out reduced dividend payments.

    Big fan of the platform in general but these bullshit IPO prices need to stop. Any player added to the platform needs to be added at a low enough floor that traders can determine their actual worth.



  • I have thought about this and don't think this is the case, but could be plausible. They want people investing in players as commission is their business model.

    BUT there is a reason why they IPO them so high. They obviously don't care about people investing in them, as half of the players IPOd this season (I think it is around 125/250) are within 2 pennies of their IPO price. No money there It is simply as they pull up the market which makes them more commission than any individual IPO will.

    Take today's players. Two centre backs with barely a PB game between them. One IPO at .95 and the other at 1.10.Making them the 36th and 21st more expensive centre backs in the entire Index, and their settle price at 8th and 13th for centre backs. That will make a tonne of players 'look' super cheap. Drag them all up and FI makes more money.



  • @NewUser84252 It is kinda a bit of two things, FI trying to cover there arse so they wont be listing the Bellinghams at 50p as they know they could be potentially slitting their own throats if he ends up being the real deal, as there would be so many shares in circulation it would be massive payouts, especially with increases in dividend/share splits took into account.
    End of the day FI has to stay profitable for all parties involved otherwise it wont be here.

    However their is an argument in some cases they are trying to artificially inflate market prices, for talking sake lets just say they keep releasing crap CB's at ipo price of £1.80, eventually even if nobody buys them that will slowly become the new "bottem" and eventually with new people joining they will look at it like "if that crap CB is worth £1.80, then this good CB must be worth £3-4", then the madness does its thing.

    Or something like that.



  • @NewUser84252 Where do you find this information about how many shares are in circulation??? It would be very interesting to see. Thanks



  • I don't think it's that complicated. I think it's pure greed on FI's part. IPOs are extremely popular (good players anyway!) and they make a lot of money on them. I've only got involved with two players, (Tanganga, Aouchiche) and they both crashed the Index. That's because of the share volume of trading. Funnily enough, everyone thought Bellingham would crash the Index. His IPO got delayed by a day and when he was released, there was no crash. Aouchiche was next, and everyone jumped on him and the system crashed. FI have improved the tech, so that may be a thing of the past.



  • @Gary-T

    I don't have access to a full up-to-date list, but IndexTrak (https://twitter.com/FIMarketCap) posts the dividend total amounts paid out per player for the previous day, and you can work out the number of shares based on that. e.g. on Tuesday Maguire earned £5,580 in dividends. Tuesday was a silver day and Maguire won best defender only, so 4p per share. Therefore shares in circulation = 5,580/0.04 = 139,500

    30/06/2020
    Total Dividends Paid: £50,532
    Bruno Fernandes: £27,324
    Paulo Dybala: £15,372
    Harry Maguire: £5,580
    Juan Cuadrado: £2,256

    I really think people should be a bit more concerned about this tbh.
    Would we accept FI introducing dividend eligible players that are unavaible to purchase?
    There is not a great deal of difference between that and deliberately IPOing a player so high to ensure there are virtually zero shares in circulation.

    When Rui Silva (who?) won star man on 22/06 (silver) £72 was paid out. There are only 900 shares in Rui Silva! I don't know who otherwise would have won star man that day but FI's Risk team have potentially saved themselves £50k by deciding to IPO Granada's GK at 30-70p at the start of last season. They added around 70 bang average, overpriced players that same week:
    https://news.footballindex.co.uk/monday-9th-to-friday-13th-september-ipos/

    These players were not added to the platform for our benefit. They were added to the platform in order to reduce our expected returns.



  • @NewUser84252

    This is one argument - and I do completely accept your logic... But looking at those figures, what do you think would happen if Bruno was winning every single day and FI were paying out £27k each day?
    The IPO's do always look ridiculous in price, and I am with everyone else who scoffs... But you would be surprised at how many of those look good value in time... Saka for instance IPO'd at £3.30 pre split. It was a ridiculous price and I laughed out loud when I saw it (likewise Greenwood at about £3.50 if memory serves).. After the split Saka was suddenly £1.30 (the split ws by 3, and he was about £3.90 at the time).. At this stage he looked unbelievable value, I bought 1500..
    It is not always as straightforward as the figures suggest - they probably factor in future splits etc into the equation



  • @Baydog said in Inflated IPO valuations = Lower Dividend Pay Outs:

    @NewUser84252

    This is one argument - and I do completely accept your logic... But looking at those figures, what do you think would happen if Bruno was winning every single day and FI were paying out £27k each day?
    The IPO's do always look ridiculous in price, and I am with everyone else who scoffs... But you would be surprised at how many of those look good value in time... Saka for instance IPO'd at £3.30 pre split. It was a ridiculous price and I laughed out loud when I saw it (likewise Greenwood at about £3.50 if memory serves).. After the split Saka was suddenly £1.30 (the split ws by 3, and he was about £3.90 at the time).. At this stage he looked unbelievable value, I bought 1500..
    It is not always as straightforward as the figures suggest - they probably factor in future splits etc into the equation

    See I disagree a but with this because it is taking the market so long to catch up to value these players. Sure, if you compare to where the market will be in 2 years, any IPO will look cheap.

    But take IPOs from Sep-Dec last year. We are minimum 6 months down the line so enough time has passed that the market should have caught up. The footie has probably gone up 60-70% in that time.

    There were 227 players IPOd in that time. 115 of them are still within 2 pennies of their IPO price. That to me is staggering given that they are such low risk investments, nearly all playing in PB leagues and the market has grown so much. If I extend it to 5 pennies or less, it is 146/227.

    Another way of looking at it how much they have risen as a % to their IPO price. Only 53 have gone up by 20% or more. In 6 months. With lots of platform growth. And are low risk.

    Of course, some have flown. But overall the trend seems to me that players are IPOd at such a high price that it will take around 100% market growth before they are valued correctly.



  • @Dr-Jan-Itor

    Depends on a lot of factors, but ultimately people will only buy if the player is value. I didn't buy Saka at £3.30 because he didn't seem like value. I then bought him straight after the split because he seemed like value. The div payouts were smaller but i is obvious over 3 years divs will go up.. The same can be said of any player. Their career is for years, so it may take a year or two or three for the market to make them look value, but that value could go on for a long time relatively speaking.. FI must have to think about that more than just whether they seem value to the people buying right now



  • @Baydog

    I do not want to see the favourite win everytime, and neither does FI.
    But when the outsider wins, I expect to have been given a fair opportuntiy to bet on them.
    By deliberately pricing a player at 2 or 3 times their actual worth, the bookmaker is essentially saying they are not taking bets on that player. They are rigging the game in their favour.

    The issue is not Saka, Greenwood, Bellingham's IPO prices. etc When a youth player is IPO'd the rational trader understands the price is based on potential future value rather than current. The issue is that for every 1 exciting youngster we ask to be IPO'd, we are given 10 average players that we didn't ask for, that will never become good value, and are only added in order to reduce our chances of winning dividends.



  • @Robin-Friday said in Inflated IPO valuations = Lower Dividend Pay Outs:

    @Baydog
    The issue is that for every 1 exciting youngster we ask to be IPO'd, we are given 10 average players that we didn't ask for, that will never become good value, and are only added in order to reduce our chances of winning dividends.

    That's how it looks like, but this is a red herring. In reality, many of these average players have had to be added to the index because they are part of a squad in a PB league team. FI can't say "I'm not going to add that player to the platform because they're bang average or crap". Traders will demand they are added or they'll be uproar. Others from non-PB teams are added because those teams are in the CL or EL, or are in a squad for the Euros or World Cup. FI will lose income if there are too many players traders want to buy that are not on the Index.



  • @Robin-Friday said in Inflated IPO valuations = Lower Dividend Pay Outs:

    @Baydog

    I do not want to see the favourite win everytime, and neither does FI.
    But when the outsider wins, I expect to have been given a fair opportuntiy to bet on them.
    By deliberately pricing a player at 2 or 3 times their actual worth, the bookmaker is essentially saying they are not taking bets on that player. They are rigging the game in their favour.

    The issue is not Saka, Greenwood, Bellingham's IPO prices. etc When a youth player is IPO'd the rational trader understands the price is based on potential future value rather than current. The issue is that for every 1 exciting youngster we ask to be IPO'd, we are given 10 average players that we didn't ask for, that will never become good value, and are only added in order to reduce our chances of winning dividends.

    There are still plenty of IPO's that I can see value in, and plenty that are pointless at the price they have been introduced. I am not defending the system or the way that they are priced, just pointing out that FI probably look at the price way longer term that what traders do.. Future splits etc have to be a consideration. For instance I have been buying a couple of players that IPO'd too high in my opinion. If there is a split then they will be dirt cheap and I know everyone would buy them at that price (like I did.)



  • @Baydog

    The dross players IPO'd way too high are even less attractive to the rational trader after a share split, because as you have pointed out the good players have suddenly become more accessible to the casual trader.



  • @Robin-Friday said in Inflated IPO valuations = Lower Dividend Pay Outs:

    @Baydog

    The dross players IPO'd way too high are even less attractive to the rational trader after a share split, because as you have pointed out the good players have suddenly become more accessible to the casual trader.

    I'd sooner see the dross just randomly dropped in during games at comparable prices - I think that would be a great way to get them in the game



  • @Dr-Jan-Itor

    Interesting stat that 115/227 are within 2p of starting price.
    It seems curious that whatever price is set it appears there are always one or two traders that are daft enough to bite.
    The cynic in me wonders whether potentially the market movers are getting involved to avoid a player winning PB and it being reveaked that there were ZERO shares in circulation, which would really damage FI's credibility.

    I will be watching the ticker when the hundred or so promoted players get IPO'd in advance of next season to see if the same user(s) is buying up a small quantity of shares in each shit player at stupid prices.


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