My take on share split

  • A lot of people say the only way a share split will help grow the market is psychological. I have a theory though. Here it is.

    If for example Messi is £10 then just over £10,000 of investment is required to increase the players value by 1%.

    After a share split Messi's price is now £5. If someone invests £10,000 this will now increase his price by nearly 2%.

    Surely this is a good thing. I believe Neymar is worth far more than his current price considering the returns he makes. But he needs so much investment to further rise his price. I feel this makes smaller value players more attractive due to potential capital appreciation.

    I think it is very likely if a share split happens the dividends will also half. But I still think this would be excellent for the index.

    I if I have got all my maths wrong and am talking rubbish please say. Also very interested to hear any reasons why a share split would be a bad thing. I can't see any myself but am very interested in counter arguements.

  • I will give you my view on why a share split Is a bar thing. Using your example of a player costing £10. If this player returns £1 in divs in a season that's a 10% return. If they do a share split by half and divs also half then that same player is now worth £5 and returns 50p. Still 10%. But the idea of the value lowering is to stimulate investment. So that £5 player will rise back up! Let's say he makes it to £10 again (I know these are theoretical numbers before anyone says) this player will still only return 50p which is only 5% of his price now. Now these returns are good for investments but the selfish side of me sees the current way providing double the ROI. And it might stimulate growth now, and initially the capital appreciation on that player doubling makes u good returns if you sell, bit any future players you buy into have that 'diluted' potential returns as I explained above. So the physical price paid for top players will look more attractive but the returns available compared to now will be far lower. In the long term this makes the platform less appealing. And more specifically, less appealing for the players currently here who know how this works and are currently working to bigger ROI on players. So I'm very much against it for my own selfish reasons.

  • @John-Renwick Hi John, my thoughts would be that in the short term you may be correct, but the post split values will only rise to a certain extent that the ROI will still be profitable, it would be highly unlikely they would rise to their pre-split values. I think in time FI would increase dividends again as they have in the past to encourage further growth. I was here when they did the initial share split and without this theoretically Neymar would now be about £54. I would hope that following a share split, values would increase then stagnate as ROI's become less appealing, then dividends will increase etc etc. I don't see why there shouldn't be one every few years to maintain the accessibility for new users to buy the top players, meanwhile us lucky early adopters end up with 1000's of the top players. Just my two penneth :-)

  • @Martino Yes, I think I agree. I can see the dividends being risen quicker than every few years for now though as this is the point where it's growing at its quickest. For it to be kept appealing and for people to keep sticking money in I can see the dividends being raised around October.
    I do think we're lucky and can become well off. I have £14,000 in this and am optimistic and hoping that it reaches £100,000 within 2 years, maybe 3 years.

  • @HappyLarry59855 Fingers crossed buddy, as long as FI is making money for themselves and new users are coming in then we should be in safe hands. My portfolio - which is about as diverse as possible - has grown on average 5% a month since i started recording at the turn of the year, these figures are insane. Long may it continue and I think a share split could be crucial to that.

  • @Martino completely understand your point but you've misunderstood, I don't think the £10 player will go back to £10 but whatever he goes above £5 after the split I mentioned it makes the div returns poorer value. And that'll be the same across all the players. So makes dividends less valuable compared to what they currently are. So for me it's not a positive thing for current traders for very selfish reasons.

  • @HappyLarry59855 if the dividends eventually rise in accordance with more money being invested then that would change my mind on the share split. Even if it was risen later than the share split in alignment to players prices (ie divs up 20% as average player prices go up 20%) then that would be a better way of doing it and a share split wouldn't bother me so much.

  • @John-Renwick Do you mean top players prices rising any more is not good for us because their value vs dividend return isn't good enough?

  • @HappyLarry59855 I mean exactly that, and halving both prices and dividends only means the prices are likely to rise more as they're more affordable. And I don't just mean to players, I mean all players.

  • @John-Renwick said in My take on share split:

    @Martino completely understand your point but you've misunderstood, I don't think the £10 player will go back to £10 but whatever he goes above £5 after the split I mentioned it makes the div returns poorer value. And that'll be the same across all the players. So makes dividends less valuable compared to what they currently are. So for me it's not a positive thing for current traders for very selfish reasons.

    This applies regardless of whether there is a share split as prices rises. Hopefully when they reach the point at which they are not worth it, dividends go up. This is what happened before... Prices rose to stupid levels.. Ali was 4 quid whilst returning a couple of 5p dividends a year.

  • @John-Renwick There would only be 1 solution then, which I feel is inevitable, and that is a dividends increase, so people can buy more of their players and new players joining do not feel hard done by.

  • I love all the financial sounding terminology that gets used on FI that has little or no relation to the real world.... Anyway, my take is that 1) a share split without a div adjustment would be ludicrous, 2) a share split with a div adjustment would be pointless. I can think of a way that they can keep this going longer term, but it would involve a huge rule change, but they can't keep shifting the goalposts each season. Rather than do a little/pointless tweak with the sharesplit now, my money would be on a much larger change in the future

  • @mike778 I agree it is the case as prices rise, but if a player is £14 and the same player is £7. The lower number will make ppl think psychologically it's more affordable, so prices will rise faster after a share split so the dilution of the potential ROI will happen after for existing users. I don't want to come across as someone who's just complaining. I'm aware I've not came up with an alternative solution and I'm not expecting different to half the prices and leave the dividends as they are, this wouldn't make financial sense for FI as a business. I don't know what the right solution is here, I just perceive the share split as a dent to the returns available to existing users.

  • @John-Renwick If it dents returns people will lose enthusiasm and invest less therefore less commission for FI. They wont want this so they will want continued growth so they will increase dividends again. It worked last time and will work again. No one loses out. And maybe even more of a valid point, when saying returns will be diluted you are saying this because share prices will have increased?? This is the first time i have seen someone discourage capital growth in the shares they own??

  • When (IF) a share split will be done it won’t mean the price increases will remain the same (as in 1p gain per 100 shares bought as a general rule), we just don’t know what the plans are and how is going to be implemented until any sort of official communication is released

  • Wonder if they would think about dropping the 3 year rule to 1 year whilst upping dividends. Last thing they will want is people holding for 3 years and maybe only way people would accept a change is if divs went up whether conventionally or via a share split.

  • @mike778
    That would be rather off putting and cause mayhem I reckon!
    3 years is fine as it attracts casual traders, 1 year is too short anyway imho

  • I haven't totally thought this through but....Instead of a share split, how about making a separate division (lets call it Div 2) and a new pb award for players in the lesser leagues eg Dutch, Belgian, Portuguese, Russian etc. Doesn't have to be on the same level as the main leagues, and make the payout 1 award based on how many Div 2 players are eligible on any given game day eg 2p 4p 6p on 10 players, 20 players 30players+. Players would move both ways between leagues as per any transfer. Whether they are still mb eligible if in Div 2 is up to FI

    Eg. Player A is currently £1 and now becomes eligible for Div 2 pb. That should see buyers and a boost to his price. The question is how high does he go before transferring to a bigger league and then does his price go higher or lower?

    This would encourage diversification of traders portfolios and provide an incentive to buy currently non eligible pb players. Id envisage more money spent on lesser priced players and a reduced amount going into the top ones, negating the need for a split. Id be more inclined to scout these kind of players instead of buying more Neymars. It would be good for FI as more players eligible for divs means more trading.

  • @NewUser110301 not discouraging capital growth, I'd be discouraging the sharesplit as it would mean faster increases of players after asplit but for the same ratio of dividends. Would mean less return on investment in the longer term. Very selfish outlook I know as the extra traders would boost liquidity but I'm looking at it from a potential returns point of view for me and other existing traders

  • @John-Renwick I don't think anyone should worry. There will be a dividends increase somewhere down the stretch, just like there was last time. It was the only way they could grow the platform then, and it is the simplest way to grow the platform now. Chill.

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