I have had enough messages and comments from DDE shareholders about the possibility of relisting DDE, that I think it requires a more formal investigation. You all know by now my stance on stock exchanges in SL - I am dubious, and I have clearly state my intention to never relist on another exchange a number of times.
However, the adage for any good business has to be "adapt or die". This is particularly true right now, in my opinion, for the land business in Second Life. The future is not as certain as it was, and it seems clear that Linden Labs' intention is to continue to reduce the price of purchasing land going forward. Whether or not this will spell the end of the "land baron" as we understand it remains to be seen.
So, I wanted to lay out the pros and cons of relisting, as I understand them. Then, I will hold a shareholder meeting, and elicit comments from shareholders here, in the company group, and through personal IM's to the major shareholders. In the end, I am willing to be swayed by the will of the majority. In effect, i will be taking a "vote", although no formal mechanism exists for me to do so - there are few enough shareholders that it can be done relatively painlessly. If more than 50% of outstanding shares (not including my own - I will abstain from the vote) want DDE to relist, then I will seriously consider it and do some serious research about which exchange to approach. So you know, my initial "gut feeling" is to go with the International Stock Exchange (ISE). Although it is small, it has a good track record, and seems to be run honorably.
First, it makes sense to provide a brief company valuation. Before the change in Linden Labs pricing, the Net Asset Value per Share for DDE was between 3L and 4L per share, depending on land prices. Under the current LL pricing model, the NAVPS is more on the order of 1.5L - 2L per share, with a liquidation value considerable lower. And there is an ongoing debate as to whether or not land can even be considered an asset. If not, then DDE in fact has very few assets at all.
However, the profit model is strong. Revenues are in the 3,000,000L per month range, with costs about $2,400,000, yielding profits of about $600k per month, or about 0.13L per share per month. Dividends have typically been (and will continue to be after September) at least 0.1L per share per month - so the annual yield on shares from dividends alone is about 30%-40% on a share price of 3L per share.
I think Vitall beck has outlined the main potential benefits of relisting:
1. The market determines share price: philosophically - I think this is best. The current plan is set, and while it provides a good return for investors, it does not take into account the effect of any factors which change the value of DDE, for better or for worse. A free market would allow the investors to determine the price of DDE shares, based on the best available information, without the heavy hand of Big Brother (or Big Sister in my case) steering the ship so directly. Now, it has to be recognized that this is a double-edged sword - it may mean higher prices for the stock (which is good for existing shareholders), but it may also mean lower prices, especially if the land business becomes more difficult.
2. Liquidity: if DDE relists, shareholders can buy and sell stocks as they wish. This would both allow new investors to buy in, and allow current shareholders to sell their shares when they wish at market prices. Under the current system, I don't really have the ability to allow shareholders to sell off - i simply don't have the time or infrastructure to become a trading platform.
3. No mandatory buybacks. At this point, I have put in place what i consider a fair plan for buybacks over the next year or so at established prices - which is not optional. If DDE relisted, these would obviously cease - shareholders would not be required to sell me any shares, and buybacks could be done at market value with whatever cash was available (starting in September). This would serve to help keep the share price reasonable. If investors know that I will be buying back shares every month, the share price would be more stable.
1. Higher risk. Under the current plan, investors know pretty much exactly what they are going to get. over the next year or more, their shares will be bought back at preset, increasing prices which will offer a decent profit for most shareholders. If DDE relists, there is no way to know whether the price will rise or drop.
2. Lack of liquidity and consistency in the exchanges. The stock exchanges in SL are all suffering from a lack of liquidity, which makes it difficult for investors to get good value for large investments. Although DDE has been successful in the past at attracting investors, there is no certainty that this will continue. And more fundamentally, the share price of companies on the exchanges seems at times almost random - many companies are either radically undervalued or overvalued based on their published financials, and at times there seem no rhyme or reason to it. Prices are subject to "gaming" by a relatively small number of investors under some circumstances.
3. Guilt by association. this is a bit more nebulous, but as you all know by now, I am not happy with the lack of regulation on the exchanges, and have been appalled at the actions of many of the exchange operators and CEO's running companies on them. By listing DDE on any of them, I am essentially buying into at least one exchange's behaviour and am aligning myself at least to some degree with the exchange and the companies on it. I have a fierce sense of loyalty when i get involved in something, and would feel honor bound to support the exchange as much as my own ethics would permit. It was in the end a conflict between my loyalty and my ethics that led me to delist from the WSE in the first place.
So - there you have it. I would be interested in your thoughts on the matter, and will actively pursue them. Comments on the blog would be helpful, so that everyone can see your thoughts, but I will also post to the group, and will contact the top 20 or so investors personally to solicit feedback. In addition, i will hold a shareholder meeting in the near future (thinking next Saturday at 3pm SL time at this point).
Please note - I am making no promises one way or the other, but I need to know what the will of my investors is so that I can make my decisions in their best interests - so please provide me with some feedback. And if you do comment on the blog, please identify yourself - an anonymous comment is the same as no comment at all...