What's wrong with my maths?



  • Right so I saw a thread saying that they weren't sure how FI could afford to pay all these dividends unless new money came in as the sales commission wouldn't cover it. To be honest I kinda always assumed that the commission pretty much covered the dividends.

    Anyway I wondered to myself, hmmm how much do they actually make in commission?

    Now I'm sure I read somewhere that the total value of all the shares on FI is approx £100 Million. I also remember reading that the average length of a hold is only three days (this was pretty old so might not be true anymore but it's the only info I have).

    So if the average hold length is 3 days then that means, on average, each share changes hands 121 days a year. Lets call it 100 to err on the side of caution and just to use a nice round number.

    So if every share combined is worth £100 Mil then each time that goes through the wringer that's £2 Mil in commission. If that's happening 100 times a year then that's £200 Mil per year.

    That obviously can't be right and I've clearly made an obvious error somewhere but I just can't work out where. Any ideas?



  • @GDS the average share may be held for a short time but that's probably distorted by lower priced shares being traded very frequently, generating small commission whereas higher valued shares are likely to be div earners and kept for longer periods



  • @Ddr

    Thanks that makes sense, yeah I suppose the 3 days is people dipping in and out of very cheap shares on match days.

    Even so it sounds like they make a pretty decent sum in commission so I don't think people need to worry about the dividends they pay out.



  • I may have understood this completely wrong. But will try and help I hope.

    Let's say 100m in FI accounts. And 100m changes hands in 3 days (that doesn't feel right, but for sake of argument will go with it, and technically it could be the same money changing hands multiple time). FI pockets 2% leaving 98m in circulation. Then 3 days later that 98m circulates again, FI takes 2% and we are left with 96.04m in circulation. If that happens 100 times over a year, with no new money, FI would make about 86.5m in commission, and there would be about 13.5m left in circulation (not accounting for any dividend payments).

    But not sure if I have fully understood!



  • I don't think you can work this out without seeing FIs books, too many variables on share price and divs on different days!

    But I'd love to know the answer, I mean on the gold day/IPD promo didn't they pay out £700k in one day?

    They might only usually pay out a small fraction of that, so I'm sure they are still pretty flush...



  • @Dr-Jan-Itor

    Yeah that would be the case if no dividends were paid out.

    The £700K dividend quoted by Marksandygill might be a one off but the £2 Mil in 3 days is also probably too high for the reasons Ddr said. It does sound though like the dividends and commission probably aren't that far off each other, which makes for a nice sustainable system. Which is good news.



  • @GDS said in What's wrong with my maths?:

    @Dr-Jan-Itor

    Yeah that would be the case if no dividends were paid out.

    The £700K dividend quoted by Marksandygill might be a one off but the £2 Mil in 3 days is also probably too high for the reasons Ddr said. It does sound though like the dividends and commission probably aren't that far off each other, which makes for a nice sustainable system. Which is good news.

    Yeah I agree. To be honest I can't see us having to worry about their finances for a long time now. Removal of IS basically secured them the full 100m that was in their account, and now the only thing they have to pay traders is dividends. Unlike so many tech companies, cash flow isn't an issue. They could probably afford dividends to be higher than commission for a while now if that means the platform can scale up far more rapidly.



  • @Dr-Jan-Itor and when they roll out 2% on accepted bids, that's a lot more



  • I'm pretty certain i read a while back that FI dont pay out dividends from commission, when a share is bought from FI, that money is ringfenced to pay dividends. I think i'm confusing myself thinking about how this now works with OBs and FI hardly minting new shares.

    From my reckoning most players are currently below their peak price and commission has probably gone up and FI have less liability as they dont have to IS anymore.

    I'm just going to stop there as i can't actually think what i want to say.



  • @GDS

    Market cap was £130m a few weeks ago but that's accurate enough for this purpose, so every single future originally sold (& now traded between us except when new price highs are hit & FI can mint fresh ones) is now sat on FI's balance sheet to fund dividends, so £130m less dividends already paid. In 2019 £337m was traded (2018:£108m) so nearly £7m/pa in commission alone during that year. I think it's safe to assume, given the growth since 2019, monthly commission income will now be £1m+ (so perhaps £12-15m pa) but that will obviously have to also fund company overheads & costs of business.

    Make of those figures what you will but FI have shown sufficient growth potential to attract investment capital if & when it should be required & I have absolutely no worries about their financial sustainability, at least in the short/medium term. Obviously future success will depend entirely upon platform growth but given they stick to the existing roadmap already outlined I believe that the future is looking very exciting & as early adopters we should be well placed to reap very significant rewards.



  • @Geronimo159387

    Thanks those figures seem way more realistic. Like Ddr said, I hadn't taken into account the fact that the majority of short term trading takes place at the lower end of the market.


  • Banned

    @Geronimo159387

    Based on that £1m (which I believe is too high, but lets go with that).

    £1m in commission.
    They paid out £700k in divs in 2 days a couple of weeks ago.
    That leaves 300k. To pay:
    28 days of divs for the rest of the month.
    Sponsorship.
    Advertising.
    Staff wages.
    Overheads.
    nasdaq stuff.
    Etc

    Not exactly inspiring in confidence.



  • @MrWh1te I reckon they probably made a loss that weekend for sure but it was a promotional offer, they must have had healthy finances to even propose that. How many weekends are they paying that much out in dividends though? I doubt they'd also be getting NASDAQ involved if they weren't in a strong financial position.

    I have my concerns like everyone but the companies finances aren't one of them at present.

    When you win a big bet at the bookies you don't worry about whether the bookie will cope financially because you know most other weekends the bank wins.


  • Banned

    @howsthebacon

    Yeah, I am not so sure.

    The more people who pull out, the less money in and in a contracting market, it could get worse. A lot worse.



  • @MrWh1te yes because all of those things had to come out of the arbitrary figure of £1million someone who doesn't work for FI thought of...

    They literally have no money in the bank, we're all doomed...


  • Banned

    @Marksandygill

    It has relied on new money up to now. The very definition of a ponzi scheme.

    With that removed, and so many people pulling out, surely FI cant go on like this indefinetly?



  • @MrWh1te no they can't, get out now while you still can!!


  • Banned

    @Marksandygill

    Plenty are, I saw a poll today, 25% of people said they would get out now if they could, with their own money intact.

    That is a huge market contraction.



  • @MrWh1te huge, still, cheaper players and better div return for those who stay!



  • @MrWh1te said in What's wrong with my maths?:

    Not exactly inspiring in confidence.

    Until CV they were growing rapidly, roughly doubling every year, which is far more important at their stage of development than profitability (investors are willing to fund short term losses to realise long term growth). I suspect they will still be running at a monthly loss but am unable to quantify the CV impact without any inside knowledge but it would be fair to assume that it has been significant.

    I have no problem with those who doubt the company, their current model or future prospects selling up & either leaving completely or sitting on cash & awaiting developments. I'm not going to be one of them as I believe the future is very bright & once all the current developments are finally in place FI will be well placed to succeed, obviously external financial chaos as a result of CV will complicate the picture but overall I'm happy with the direction that the roadmap is taking them in, even if it takes rather longer than anticipated to finally get there.


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