Tuesday, November 6, 2007

The First 25 WSE companies

Happy Tuesday, from Toronto, where we freeze our bits off in the crisp morning air....

A few days ago, I was approved to be an analyst on the World Stock Exchange. In order to do my due diligence before actually reviewing anybody, I started to just look through the financials and posts of all of the companies on the WSE, and I started to see some interesting trends. I wondered to myself: "Self, you remember the relatively few companies that were in the WSE when DDE first went live, and I wonder how the first 25 companies that went public are doing."

So, I cycled through the announcements on the WSE, from the first company's first announcement in March, 2007, to the 25th company's first announcement (which i was gratified to discover was DDE - hehe). Here's a list of the first 25 companies that made a post on the WSE, and their current status. Ah.... the memories that they bring back... Ginko, Montana's, Yellow Paperclip...

1Tao Heavy IndustriesTHIActive
2The Success FundTSFBankrupt
3Games LimitedGAMBankrupt
4Bob Perry's StoreBOBBankrupt
5People PoolPPLActive
6Kavai ConglomerateTFIBankrupt
7Touchet Group CorporationTGCBankrupt
8AM Sports BetAMSActive
9Sun Media ConsultantsSUN Active
10Ginko Currency ServicesGCSBankrupt
11L&L Rentals and SalesLLLActive
12Ford Edelman DesignsFEDHalted
13Lotto Networks UnlimitedLOTHalted
14Action Mortgage and InvestmentAMIActive
15Alluris EstatesALLActive
16Ginko Investment FundGIFBankrupt
17Midas Development CorpMDCBankrupt
18Redux TechnologiesRDXActive
19Montana's Poker RoomMPRBankrupt
20Blumont CapitalNMCActive
21Yellow PaperclipYEPMoved
22PPC HoldingsPPCBankrupt
23Second Street ParntersSSPActive
24True 2 Life StudiosTLSBankrupt
25Delicious Demar EnterprisesDDEActive

Now, the fact that many of the companies are now out of business is not really a surprise. As Casper Trebuchet pointed out to me yesterday, the speed of SL is accelerated compared to RL, and whereas 50% of companies are out of business within 5 years in real life, it takes considerably less time for the carnage in SL - it only took seven months. The disturbing thing to me was the failure of MOST of the financing/banking companies. Obviously, people that jumped into these industries early, expecting SL to behave like RL, were mistaken, and either simply did not know what they were doing, or misjudged the SL economy and market badly.

So, I did a little more digging on the 13 companies that have actually managed to survive for the last seven months, and decided to look at a few key performance indicators for each. Now, please remember that I am NOT a financial analyst in RL - and I provide these numbers as they are - without any real description of the present circumstances of each company. There are cases in which extenuating circumstances exist (like Ford Edelman Designs, for example, in which the CEO, a US soldier, was posted to Iraq).

The metrics I have used are quite simple - some of them (EPS, PE Ratio, NAVPS) are all standard financial indicators, but I have tried to add a few that are specific to the WSE/SL environment:

  • Average Number of Posts per Month: this is a measure of how communicative each company is. although more is not always better, it is interesting that the companies that are successful financially, also seem to have kept their investors and the community more informed.

There are 5 indicators dealing with dividends:
  • - total number of dividends posted: this will give you a rough idea of how often they post. Remember the time frame is 7 months.
  • - Total dividend per share: is the sum of all the dividends (per share) over the last seven months.
  • - average dividend per share: over the last seven months
  • - last dividend date: shows how up to date they are with giving dividends
  • - last dividend per share: the amount of the last dividend posted - this can show whether the recent dividend is lower or higher than the average - i.e. what direction it is going in.

The rest are pretty self-explanatory:
  • average 30 day share price (from Nov 2)
  • 30 day trading volume
  • Total shares created
  • Total shares in float (in which i exclude shares held by the CEO)
  • Price Earnings (PE) Ratio: taken from the WSE financials, in which i believe they use the current price, divided by the most recent statement of earnings - so not necessarily always a level playing field on this one. This is a measure of the value of the stock.
  • Earnings per share (EPS): again from the WSE financials, except in one or two cases, where i had to dig through the announcements to find the most recent earnings. This is a measure of the potential profitability of the stock.
  • Net Asset Value Per Share (NAVPS): once again from WSE - simply the total value of assets divided by the number of shares. This is a measure of the stability of the stock, for some companies.
These last three are some of the most standard measure, as I understand it, and should be looked at together - some companies with very few tangible assets (like service companies), and hence a low NAVPS, can nevertheless be very profitable, and have a high EPS.

I will leave it for another post to go into more details on my analysis, but thought that some of you would be interested in seeing the numbers first.

If there is any enthusiasm at all, I will do the same sort of thing for all of the companies on the WSE - rather than picking one specific company to review to begin with. Please feel free to leave comments, questions, observations etc, about either the numbers, or about the post in general.




ServMe said...

Thanks for taking us back in time and looking at how all these early adopters are doing, definitely an interesting exercise.

I must point out though that YEP is not bankrupt, but trading on SLCapex now, with 10 announcements from July 18th to November 3rd, and 2 dividend payments.

Delicious Demar said...

ack! thanks Servme,
totally didn't think of that - I have changed YEP, and will go through the rest and make sure i am not slandering anyone else!


Tom J. Groot said...

Thank you for this article, Delicious. Very interesting and well-done research. Tom, WSE employee

Zadruk Zabelin said...

Communication is certainly a key to gaining peoples attention and trust, which is what you do so well Delicious. I look forward to reading your analyses and wish you all the best.

Delicious Demar said...

Thanks Zadruk and Tom. I am looking into the logistics of getting data together for all of the listed WSE cmopanies, to create a bit of a "scorecard" so we can, at a glance, do some preliminary analysis and spot trends and such. (That IS more what I do in RL, just not usually opn financial date - lol) It is going to be quite a bit of work, but I will chip away at it as I have time.

In terms of some analysis on these specific numbers, I hope to get something done in the next day or two.

If anyone has any suggestions about things that would be of value, and that are public information on the WSE or elswhere, I would certainly be interested in hearing about it.


Aldon Hynes said...

I think this is very timely and well thought out. I wrote a similar post back in October, Is Directors’ and Officers’ Liability Insurance Coming to Second Life? where I looked at the first 150 press releases on the WSE.

One of the things I noticed there is that, at least for the first 150 posts, the majority came from companies no longer listed on WSE, and the companies removed from the exchange had issued a high percentage of press releases than those who stayed, so I'm not sure that the correlation between communications and success necessarily stands up.

I should also note that you list BOB as having moved. It did move, and merge as part of the move, and then the merged company failed, so I would probably leave them in the bankrupt column.

All of that said, I want to complement you on your great analysis, as well as on the ongoing success of DDE.

Stephane said...

Great job DD, and I like the metrics you ve taken, especially the average number of posts, that s interesting.
If you need some mathematical help on Pearson's correlation, do not hesitate to contact me.


Anonymous said...

Very nice analysis. Brings me back to the early days posting an IPO... seeing WSE move from Friedman to Silicon to its own SIM.

I'm still surviving though. As are lots of companies on the WSE and i hope people are still worth the trust to continue.



SirMarkus Kidd said...

This is a very cool piece... What I find most interesting is how much things have changed and virtually exploded on WSE since it's not even a year old yet!

I am particularly amazed at how mature the stock trading platforms seem to be despite that most of what we're seeing in it now began about a couple months before I got my account.

Delicious Demar said...

Thanks to everyone for their comments :-). One thing i forgot to do - which given the subject matter of previous blogs here and elsewhere, I should have - is to disclose my own interest in any of the companies listed here. So...

Disclosure Statement: Of the companies included in this analysis, I have the following interests:
- THI: shareholder
- LLL: shareholder
- PPL: Board Member: Senior Advisor
- DDE: CEO and largest shareholder

I have received sufficient encouragement (frankly, it doesn't take much - rofl) that I am going to continue to develop this kind of comparative report for the rest of the companies actively trading on the WSE. Stay tuned...

I will also make some comments about what I saw in these numbers in my next blog... I know you are all breathless with anticipation....


ServMe said...

Please post quickly, I can't hold my breath for that long :D

Andros Chemistry said...

That's all well and good, but it's important to recognize that the SL stock market is still just a game. There's no regulation, and no oversight. The "companies" are make-believe. Someone selling a company is accountable to no one. Every one of these companies could very well be an elaborate ruse - a Ginko of sorts, whose "interest payments" are presented instead as dividends, with the money coming directly from the IPO and ongoing sale of stock. There is no guarantee that there's anything more than the claim of earnings. Despite a harsh business environment, no SL company would ever be caught dead posting a financial report with a loss. Why do that when they can lie? If any SL business owner had any confidence in their own company, or wanted his/her investors to have any confidence, he'd maintain a significant stake in that company.. which nobody ever does, including yourself. You're at 35% ownership, with a secondary offering poised to bring you down to 17% ownership potentially. Before too long you'll have no incentive to continue laboring for DDE (regardless whether there are profits or not), because you simply won't benefit from that labor. At what point does your company simply cease to exist?

This is all just hypothetical, of course, and I wouldn't actually accuse you of plotting in such a manner. I've been told you're very honest. But it's good that everyone recognizes that SL investments are inherrently fake, and they're putting fake money into them as part of a game. I mean otherwise, people might get upset when the investments inevitably vaporize.

Rich and Creamy said...

hmm maybe I should get a little into THI.

I have such an old account I still get an allowance once a week.

Some day I think I'll drop real cash on the WSE because SL is supposed to be the future right?

Delicious Demar said...

Thanks for the post Andros - it is thought provoking. At the risk of responding to the "So, did you stop beating your kids?" kind of question, I will respond. lol

At the end of the day, parts of what you are saying are true - there is no regulation, and no consequences (so far as I can tell) for company owners that take the money and run. And you're right - there is nothing to stop me from posting totally fictitious numbers, playing a not-even-so-elaborate game to make the company look good with the numbers, and benefit in all sorts of nefarious ways, from selling off shares to doing secondaries without actually using the money for the purposes stated. It looks as if some people have done exactly that - put up a nice plan and paid a few dividends, and then sold off their own shares, and disappeared with the proceeds and the IPO money. Can you say, "Montana's Poker Room"? There's no real way to respond to that. It's just true.

And to be honest, your comment about my owning an ever smaller portion of my own company really hit home. I REALLY hate that part of this. The fact is that I could have created a secondary offer of shares, say, 4m shares, and just asked Luke to assign 2m of them to me. Woot! Free shares! Lot's of people have done just that, and basically diluted the value of their shares, by giving themselves free ones!
So, in the end, I decided to take the hit, because I thought it would be wrong to do it any other way. My plan, and one that I have followed since the beginning, is to buy back the shares with whatever proceeds i get from the dividends, and other businesses that I have running in SL, to increase my stake in my own company.

So - to say that anyone that had confidence in their own company would maintain a significant interest in it, is an oversimplification. In this case, to be more exact, I am confident enough in the success of the business, that I am willing to sacrifice my own equity stake in the company in order to grow it, with the intention of increasing it back to majority ownership over time...

Of course, now I just feel silly, trying to give a substantive answer to your comments, when you have basically said that we are all just playing at running companies and it isn't real at all...

However, people are actually using real money, not fake money, to play this "game". And there are some people who take the game seriously, when they are playing with other people's money. One day, I hope to make Second Life profitable for me in my real life - by building it to the point where the play money can be exchanged for real cash. And i know damned well that the only way to do that in this game, is to use the RL rules of honesty and fair play.

Eventually, if you fuck with people, you get fucked. That is as true in SL as it is in RL.

Delicious Demar said...
This comment has been removed by the author.
Anonymous said...

"Other people's money"

That reminds me of a movie with Danny DeVito playing nasty f*cktard.

Sure, the WSE and any Second Life stock exchange falls under the category "stock trading game".

I find the SL versus RL aspect a bit "grey". What is virtual and what isn't. The concept of virtual company profits and real life cash is somewhat strange in many peoples eyes. However, a dedicated SL player thinks different. Like I do. As you say, Delicious, "And i know damned well that the only way to do that in this game, is to use the RL rules of honesty and fair play." I totally agree.

In my eyes SL is more than making profit. SL really does something with my RL feelings. Lots of things are based on trust, especially with things involving money.

Well, i'll start a blog to see if people see it possibly my way too. Maybe then people realize that not every company on the WSE is based on mistrust.


Your analysis is very neat, and i'm looking forward to your next article.


Geyl Fapp


Lindsay Druart said...

What a trip down memory lane this was. I remember getting our IPO pushed back 2 weeks due to system errors in February. Hell, I remember when HCL was just an IPO on the wall of OurBank in Friedman. But a lot of key things have been said here.

I noticed the "free share" post and I raise my hand being one of the CEOs that did that during our first secondary many months ago. Were people mad at me? Hell yeah. Did it devalue shares? Actually no. There is finesse in the operation of a public company and striving to make the best out of a touchy situation and remaining trustworthy in the eyes of your shareholders and customers is key.

As companies grow, they forget the people that helped them get there from time to time but these are the people that help companies continue to grow. Maintaining good rapport with the market it key as well and communication with fluff is no better than no communication so you got that there.

A good question was raised though.....what happens when the CEO doesn't have majority shares? In a good CEO, nothing...I don't know about anyone else but I do this for the love of it. I don't make near enough for the time I put in but I love what I do. I like that people trust me and value my judgement and have faith in me as a CEO. That's my drive. To be a recognizable brand. For someone to IM me and say "job well done."

In the beginning I used to get bombarded with email and IM complaints. I can count them on one hand weekly now because I set a bar and a standard for doing business fairly. This is what keep us veterans around. The drive to be more than just a business but to be a solution. I congratulate everyone that has stuck it out this long. We are coming up on a year, people. It's like we are SL senior citi-companies.

Anonymous said...

GAL is not Bankrupt...

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