Thoughts: IPD's to be removed and intrinsic valuations.



  • IPD’s will be removed, at this point that’s a play I think FI will need to make at some point before next season.

    My thought process is very simple on this; It’s a loss leader for the football index and it encourages downwards pressure of player prices with no incentive for them to rise.

    The loss leader statement for football index is easy to quantify, they need 4% commission (2% on buy’s and 2% on sale’s) to cover the IPD’s earned via a player in a 30-day window. For a £1 player that equates to the maximum goal/assist/clean sheet output to be less than ‘2’ over a 30-day window for commission to cover IPD’s. Looking at the number of proven goal scorer's & assisters (Immobile, Ben Yedder, Vardy, Mertens, Illicic, Muller, Benzema, Moreno, Suarez, Belotti, Morata to name a few) under £1 currently these types of players have a significantly higher output than ‘2’ on a regular basis over a 30-day window. Consider similar but not as prolific players under 50p, including keepers, then look at the players just over £1 whom are heading downwards in price.

    The valuations of players are slightly more complex, but the underlying aspect is cheaper player prices present higher levels of profitability with less commission to account for when actively trading. The active user base at present (approx. 3.5k traders), in my opinion, is focusing on the IPD returns as they’re more regular and guaranteed then PB or MB dividends. If I can buy and recycle player ‘X’ at 30p every 30 days and bank the IPD’s why do I want his price to rise? Why do I want to pay a higher level of commission on player ‘X’ and reduce my profitability? Player ‘X’ might return me close to 100% ROI in a season alone and if I hold 900 shares in player ‘X’ I can exert influence over his price (current VWAP) to keep it there. If the majority of ‘active’ traders are subscribing to the above there is less investment in the top end (top MB/PB winners) and there is a trickle effect of players prices at all levels gradually eroding before they become viable for IPD recycling or the MB/PB returns become competitive against returns on offer (% ROI) when IPD recycling. To clarify, I believe the market is currently at this point in terms of player prices and buying and selling patterns, IPD’s are no longer secondary in terms of what traders are chasing.

    That leads me onto intrinsic value;

    I’ve had a mindset that you would value a player based on potential dividend return’s over a 3-year hold period, that seemed to be at least reasonable and the catalyst for top end growth. That intrinsic valuation would be based on PB & MB returns only and not IPD’s. Over the last few months I’ve re-evaluated that and I now believe the intrinsic value of a player is…...truly unquantifiable..... Intrinsic valuations are subjective, but if I can’t see the full number of shares in circulation, if I can’t see the full depth of bids and offers then how can I come to an assessment on what to pay for a player? The only consensus I can come to is If I’m going to purchase a player, I need some relative confidence that dividends earned are going to pay back 100% of the purchase price in the quickest time possible. The other view here is that intrinsic value is ‘zero’, you’re simply trading the spreads and quickly dumping anything that doesn’t come off as intended. To clarify again, I believe the market is currently at this point in terms of player prices and buying and selling patterns. Traders either have no interest in holding past a quick flip or they are waiting for lowest possible price point to maximize dividend returns.

    So, my thoughts in summary;

    IPD’s are unsustainable for the football index.
    IPD’s are now as significant as MB & PB.
    IPD trading keeps player prices low.
    Intrinsic value is unquantifiable under the current system or ‘zero’.
    Price erosion will continue under the current conditions while traders seek optimal returns.

    The intention here is just to share some thoughts, be great to here from people whom see things differently or want to expand upon any of the above. For me we can better guess what’s to come if we understand where we are.

    To end on something positive I do think the index will be a healthy playground to trade in long term and can see a real boom during the Euro’s. Remember that liquidity is also relative to the size of the boat you’re trying to float, a competition like the Euro’s has far less players and games to choose from then standard all year round leagues. Timed with a promotion from FI could be profitable and fun for us all!



  • @DW

    To remove or limit IPD's makes 85%+ of the players currently on the index TOTALLY WORTHLESS, as they simply won't compete for PB/MB/TOTM, the only players anyone will buy will be the top 300/400 so this would effectively destroy FI as we know it.

    Traders are undoubtedly targeting & trading for these short term IPD gains but it's largely due to FI destroying any level of trust or confidence in the platforms medium/long term viability or success by their inept & incompetent mgmt of the last 12 months, which has crashed prices, removed liquidity & driven away thousands of £££/users. To remove IPD's will only make this problem worse not better & would likely signal the death knell for the future.

    The answer is to reinstall liquidity, in the short term that would be with trader/self provision (Buying selling to yourself or non market IPD refresh) as this wouldn't need market refreshing, so would stop the current price undercutting & search for market liquidity. Then in the medium term either market growth &/or MM could be introduced to create organic liquidity. Removing IPD's is simply the WORST possible move FI could make & would finish off the majority of the platform.



  • @DW really good points. Had t tgought of that but you are right.

    Ipd not condusive to player valu3 rising



  • Hey @DW

    How many players are you trading for IPD's and in what quantities?



  • @DW said in Thoughts: IPD's to be removed and intrinsic valuations.:

    IPD’s are unsustainable for the football index.
    IPD’s are now as significant as MB & PB.
    IPD trading keeps player prices low.
    Intrinsic value is unquantifiable under the current system or ‘zero’.
    Price erosion will continue under the current conditions while traders seek optimal returns.

    IPD's are what give 85% of players any value at all, without them that whole market sector are worthless

    2/4p whilst important aren't as significant as 4/8/14p (or double for starman), although there's a good argument that they're more difficult to win

    Undercutting prices is what's driving/keeping down prices & that's largely due to lack of market liquidity not IPD's

    Current conditions & market mechanics will only improve with increased liquidity & market growth (solutions for both can be found in my previous posts)



  • @DW Great effort to put down a long post.

    I have the opposite opinion because If they remove IPD, the players' values will be much lower and the number of trades will be much less; a significant number of short-term traders will leave, and it is over for FI!



  • If ipd was removed that would be signing thier own death warrant, removing instentives is not the right move



  • @DW

    For me if they removed IPDs then that is the end of the road for FI.

    2950 of the 3000 players on the index would need to be removed as they would be untradeable and completely worthless. FI would need to either pay back all the money invested into those 2950 players rendered completely worthless, or face the backlash either on social media or in the courtrooms.

    The PR damage of reducing dividends would be worse than what we have seen lately.

    On the plus side perhaps the value of those 50 players left on the index would rise, and the Sancho club will get their wish. However the joy would likely be short lived as FI could be put out of business trying to pay back all of the customers who have their money outside of those 50 players.

    If they removed the 2950 players and pay us all back in full for those customers who hold, then I guess it would not be the end of the world removing IPDs, I would not be reinvesting any of my money and would look to sell up the rest, as for all I know they would then reduce the dividends on the 50 players left as they would now have set a precedent for reducing dividends and the tiny amount of trust left would be gone for good...



  • They wouldn't remove IPD for a variety of reasons, @Geronimo159387 has mentioned some and it is not in FI's interest to remove something that forces traders to trade. Currently it's a loss leader, but when prices increase, FI earn more commission and I imagine that's their goal.

    IS was a much more significant loss leader that IPDs are or will be.

    On intrinsic value, my idea would be that dividends for the top 200 should be percentage based. Gives a reason for there to be a top 200 (as currently is just a tab), and means that if a player is near the cusp of joining the top 200, there would be a push on buys in the hope that the players price could be pushed into the top 200 to earn more divs.

    Would return much more liquidity in the platform, but also much more volatility. Also would create a load of commission for FI -let's say a 50p player was on for gold day divs, jumps up 50p in price and enters the top 200. There's going to be a lot of current traders seeing it as a great opportunity to get out at profit, FI would be making 2% commission on an inflated price. They could also mint new shares during the rush to buy shares, and then use market makers to buy the shares back at a lower price when they dip, either taking them off the market, or holding on in the case of another spike.



  • @Geronimo159387 I agree, removing IPD's would kill the index. I'm more highlighting how, especially at the current prices, I don't believe FI can cover the liabilities of IPD payments long/medium term if the majority of active users are trading for them. + it stifles top end growth, which also hurts the FI pocket if they can't mint new shares.

    I'm familiar with your ideas and views on IPD refresh & liquidity, I'm just not convinced that FI as a company can make any money from it. Perhaps if the majority of the active user base is predominantly trading for PB and MB then minor losses on the IPD's is sustainable for them as a company.



  • @Dan-The-Man hey buddy.

    I have about 35/40 players between 100 and 300 shares I'm trading for IPD's predominantly. IPD's are actually fudmental for me currently, more looking at the flip side on how FI sustain them long term.



  • @DW

    I think once we have market makers/liquidity providers acting more on the bid side, there should not be anywhere near the current level of downward pressure that we are seeing. That for me is the easy answer. If LP/MM are providing a bid wall then the price of a player will not go lower than that as the seller would hit IS rather than keep putting in lower and lower offers. As long as those bids were continuously replenished (similar to old IS in some ways) then the prices will not be driven down.

    IPDs for me are more for the gambler side of the platform and PB/MB more for the longer term type better. I like to have a mix of both. I do not worry about the financial viability of the pay outs as I believe like others on here such as Dan the man that FI has done well out of recent market behaviour, and that it is in their hands on the bid side to rise the market back up in value if it is not viable to keep paying out at the current prices..



  • @DW

    Traders didn't destroy the index or crash prices, FI's decisions & incompetence did, so they are largely in a difficult situation of their own making. They can clearly afford to continue paying IPD's for several years as they are sitting on the "minted capital" of every player (now that they have removed IS liability). So whilst your "affordability" argument maybe partially true in the very short term , if they believe the market will recover & flourish in the future, then they will have no financial difficulty at all covering the current costs.

    Remember they were minting tens of thousands of Sancho at £15+ only a few months ago, lots of 2/4p payouts financed just from that single player alone. It's in both traders & FI interests that the market both recovers & grows. Traders will benefit from the gradual cap app rising prices bring, whilst getting the fantastic dividend yields in the meantime, & FI will secure both more commission & minting capital from a healthier, growing market.

    Liquidity should be their one & only top priority atm because without it the market will continue to bleed both £££/traders. In fact they could do far worse than INCREASE IPD's, similar to the 5x promo, as the amount of liquidity, trading & commission that it encouraged was the highest we have ever seen.



  • Echo what everyone says above, but they will have the data on dividend reinvestment.

    IPD's are a way of providing cash to traders to spend in the market, I doubt they would have doubled them if the data was suggesting that traders were withdrawing.

    I'd probably also say with a bid and sale commission, the amount of IPD won is eroded by the commission paid by traders who are impatient/don't realise the commission on both sides.

    Hasn't been a 'premium' PB winner for a while either, which will suppress their liability on this side. I'm not concerned about their div liability, because I expect that with their reserves, plus commission, FI will be in a healthy position for many a year.



  • Unfortunately some people are hell bent on being negative and trying to drag everyone down with them.

    Even when things are looking up, they resort to making up fake negative ‘news’ about what ‘will’ happen over the coming news.

    It’s a shame, but such is life.



  • @DW I see your logic and purely from a cash flow perspective, it may well make sense to scrap or reduce IPDs at current prices. However, it would probably do far more harm to sentiment and would take a long while for FI to recover this goodwill (we have not always had IPDs and people still traded in all parts of the market, so whilst I don't completely agree that it would render virtually all players valueless, I do believe the user base is gradually becoming more knowledgeable on things like valuing holds and having now had IPDs for so long, getting rid now would be a huge risk).

    Obviously if they were replaced with something different, people may come round to the idea but as with any change, there would be winners and losers and I can't see FI wanting to rock the boat to that extent now, whilst the OB system is still setting in.

    FI have a responsibility to their shareholders and to us as their customers to be financially stable, so if they had to change the dividend structure to do this, I would support the decision, as I can only make money if FI continues to be able to trade. However, I don't think FI are anywhere near needing to do this yet, so I can't see the removal of IS either being beneficial in the short term and therefore, I can't see it even being a consideration for them right now.



  • @Mintyfresh said in Thoughts: IPD's to be removed and intrinsic valuations.:

    (we have not always had IPDs and people still traded in all parts of the market, so whilst I don't completely agree that it would render virtually all players valueless, I do believe the user base is gradually becoming more knowledgeable on things like valuing holds and having now had IPDs for so long, getting rid now would be a huge risk)

    This is true, but people were trading all parts of the market because the old IS made it pretty much risk free to do so. With order books the risk has changed quite significantly, to the extent that we physically cannot sell a player quite regularly. The only thing that allows us to trade them in the OB system is IPDs, take those away and there are huge swathes of the market that people rightly would not touch.



  • @DW

    It's a strategy I'd love to see in action for a year to get a real world outcome but it's not something I've ever considered truly viable, at least not at scale. The maths have never really added up for me.

    Glad to hear people are having success with it though.



  • Removing IPD would make 90% of players worthless and how would FI actually do it without creating more issues?

    The market will react as soon as the announcement is made, so even if they give 30 days notice, it would crash the price in those players instantly. If you had a £1 player would you hold for IPD knowing that he was worthless in a few weeks time, or desperately try to sell at any price?

    Unless FI bought those shares back there would be carnage,



  • @Geronimo159387 said in Thoughts: IPD's to be removed and intrinsic valuations.:

    @DW

    Liquidity should be their one & only top priority atm because without it the market will continue to bleed both £££/traders. In fact they could do far worse than INCREASE IPD's, similar to the 5x promo, as the amount of liquidity, trading & commission that it encouraged was the highest we have ever seen.

    You and a few others have highlighted how varying forms of liquidity should address the balance and ultimately I think that's sound logic for a rosier picture for all. I could really see the potential for prices to rise and stabilise higher if the things mentioned by you and a few others come to fruition.

    On the Sancho example I've always assumed that the £15 FI earned for minting a share will need to cover the lifetime dividends of MB & PB payouts which for Sancho could be over a decade. While they probably have a pretty penny or two right now they can use (and I agree they should) they also need to be prudent enough to service the long term liability of the dividends.


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