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blankseplocked The whole public IPO/Bond concept
 
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Vilgan Mazran
Aperture Harmonics
K162
Posted - 2010.09.24 16:23:00 - [1]
 

TLDR: skip to the bottom for 2 questions.

So... been playing Eve a bit now. At the start, I was a newbie with lots of ideas on how to make isk (some would have worked out quite well) but no one knowing me to having more isk than I will ever spend. Over that time period, I've read the MD a lot because I find the Eve economy very interesting and its fun to predict what will happen and then see how close I am.

The one thing that confuses me, is how obsessed the MD forum is with public IPOs/bonds/banks, which is something that has NEVER made sense to me. I see offering after offering after offering, and never seen one that actually makes sense to invest in. Some personal observations:

1) People who really need the isk are usually too new to be trusted with any significant amount.
2) People who are not new and actually play the game, should personally know (through corp/alliance/whatever) more than enough people to fund at least what a public offering will fund and usually more.
3) People are much less likely to rip off someone the better they know each other. An irl friend is the most trustworthy, followed by (imo) people you've met irl, then people you fight together with/talk on vent with, then people you've at least talked with on voice comms, and last of all.. people you only know via forum posts. The last is especially vulnerable if you only know someone's forum identity and not who they consider their "main" in game.
4) People feel less bad about ripping off players in a game if they burnout, as they no longer care as much what people think of them. So even if someone isn't intending to scam at the start, they might change their mind 6 months down the road.

Given this, it seems like people who seek public isk fall into one of the following categories:

1) Brand new and don't know anyone. Not going to get much isk anyway, and is probably better off just taking a drake and running w-space sites/missions/whatever for a bit and funding themselves. Even n00bs will likely have a shot at getting funding from a corpmate they've chatted with on comms.. with less pain than dealing with the MD (imo).
2) Anti social and don't know anyone in game.
3) Know people in game, but prefer to go through extra hassle/annoyance of public isk either because the people that DO know them don't trust them, or because they want to keep open the possibility of scamming someday and would feel bad about scamming their good buddy John who they fight with but would feel less bad about scamming the MD and then chuckling "haha, its eve suckers" or some such.

heck, most (all?) IPOs/bonds don't usually involve chatting with the person doing the bond on voice comms. Instead the "due diligence" seems to be having an audit done and calling it a day if the audit comes up clean. It really seems like the main reason they exist at all is people have a lot of isk and can't figure out how to invest it intelligently themselves so they throw it at whoever promises them a decent return. Even the most obvious scammers (I personally consider SHSG an obvious rep grinder w/ intention to scam someday) will continue to get isk until they get a lot of it.. and the ones that aren't obvious and come across as intelligent and trustworthy will get a LOT of isk. Even if they weren't intending to scam all along, eventually many will lose interest in the game and it will become a tempting possibility.

Anyway, I guess none of this is new. So, after that massive wall of text I have 2 questions:

1) Why would you run a public IPO instead of just using the isk of friends/corpmates? Not only is it usually easier, but then the interest you are paying out indirectly benefits you as well.
2) Why would you give isk to an ipo/bond when the %s strongly suggest that the expected outcome is negative?

Grendell
Technologies Unlimited
Posted - 2010.09.24 16:36:00 - [2]
 

As an example to my last bond, which can be found here.

My client came to me seeking a loan for about 225b isk. Under normal circumstances I deal with that privately and it never hits the forums like most of my deals.
The issue was that at that point in time I had already invested all my liquid funds in other investments. My client wanted to remain anonymous, but did not want the hassle of dealing with the MD community. So I started the bond on his behalf for a small administration fee.

I personally try and keep all my dealings and investments off the forums, especially out of MD as it tends to attract a lot of trolling, which I just don't care for. I have a small group of clients I deal with privately and I'm happy with that.

But when the client came to me, as previously stated I did not have the liquid isk to accommodate his request. So due to a time a constraint, anonymity requests, I decided to bite the bullet and make it work for him.

Other then that I haven't really made any real public offerings, but not everyone has a big network of wealthy contacts to handle everything privately.

Hope that makes sense.

Trebor Whettam
Posted - 2010.09.24 16:41:00 - [3]
 

Quote:
1) Why would you run a public IPO instead of just using the isk of friends/corpmates? Not only is it usually easier, but then the interest you are paying out indirectly benefits you as well.

I personally don't intend to ever request public money, but I think a lot of people do it for the fun/RP element. Short term loans to get some liquidity also make sense a lot of times. None of in game friends or corpmates have a lot of spare isk, so I can understand why people here come to the public for money.

Quote:
2) Why would you give isk to an ipo/bond when the %s strongly suggest that the expected outcome is negative?

Your analysis is overly simplistic. Just because the whole universe of ipos/bonds has a negative expected return does not mean that each individual ipo/bond has a negative expected return. The fun and (maybe) profit is in trying to filter out the bad investments and get in on the good ones. I have a theory on what investments are worth investing in, and testing that theory out is well worth the risk of losing (especially with the real chance of winning). Unfortunately, it's tough to get in on investments around here regardless of their risk profile.

Phoebe Halliwel
Posted - 2010.09.24 18:21:00 - [4]
 

Originally by: Vilgan Mazran
1) Why would you run a public IPO instead of just using the isk of friends/corpmates? Not only is it usually easier, but then the interest you are paying out indirectly benefits you as well.

Agree with this sentiment on small offerings, especially people very new to the forums. I've sponsored a fair few people in game, with mixed success, it's usually easy enough to arrange if you've known the person a while and spoken to them about their plans. It seems like a lot of people who start the game and get into indy straightaway solo would benefit an awful lot from simpy joining a decent indy corp where they can get help from more mature players. On the forums I wouldn't underestimate people's desire to help out new players (who they don't even know), which is why a lot of first time offerings seem to fill. Does seem to be partly sentimentality about how difficult everyone remembers it being starting the game.

Larger offerings though, 10b and above can be a pain to run with friends as investors (in my experience) particularly if they are not well acqainted with how investments run. I ran one between 10-30b for just over a year and had people convo spamming me about when their interest was due (if they needed a plex or to buy/replace something expensive), investing then pulling out the following week when ISK had already been tied up in mats etc. You start feeling like people's personal banker, so it can be more hassle than it's worth. The last thing I wanted to do was be awkward with people I considered friends, even if they sometimes broke the agreed terms. Logging in to have people asking how things are going and remarking on the particular market you are in gets a bit wearing as well, or offering to help when you prefer to operate solo. For large offerings I can see some benefit in doing them on the forums, because a well run offering where all terms are met, should be relatively low maintenance to administer and you are typically left to get on with it without too much discussion.

Originally by: Vilgan Mazran
2) Why would you give isk to an ipo/bond when the %s strongly suggest that the expected outcome is negative?

Isn't investing like a game within a game for eve players? You could just as easily ask why people play eve poker. Some people see investing like gambling, there's no accounting for taste Smile I know I've personally invested upto 20b in public stuff and only lost 2.2b so far. That wipes out all the interest I made, but not the benefit I receieved from the interest at the time it was paid. To be fair I've lost far more in PVP ships. Maybe it's worth asking how much people have invested vs lost... there was a thread like this a while back I think. Even though there have been massive scams, regular investors might not have lost that much ISK despite the fact that the most well known scams were for massive amounts, if they are very picky about what they invest in.

Regarding the other comments about why people invest for fairly low ROI when they can probably make more ISK themselves... effort? Some people get to 100-200b or whatever they've set as a target and that's it, they're done active ISK making. Even if you invest in a lot of big ticket stuff personally, say T2 BPOs, there's still time involved buying mats, producing, selling etc. Investing, whilst you might need to read the forums to keep up to date, isn't that time intensive. Agree it's far riskier, but some people enjoy the risk.

Those are pretty closed questions btw, with a fair few of assumptions not everyone would agree with. Might be better to ask "why do people invest" and see what they come up with.

Berikath
Posted - 2010.09.24 19:31:00 - [5]
 

I would agree that, to some extent, the idea of an "IPO/Bond" strikes me as odd. It seems to me that in most cases the very idea of a bond or IPO seems contrary to what people in MD generally seem to look for... i.e, making themselves cash moniez! I can see it making sense for extremely capital-intensive, low-maintenance, low(%)-yield operations (e.g., Titans4U); even taking a small cut, your reward per time invested will be very large and you won't have to tie up hundreds of billions of your own funds to do so. In most any other situation... if you think it's going to be profitable enough to spend your time doing and for others to invest in, why aren't you looking to keep as much profit as possible for yourself (i.e., getting a loan)?

That said, I do see public money as potentially very useful. In fact, I would point to my first and second loans for examples of where it makes sense; I had a profitable business going, I could put significantly larger amounts of ISK to work than I had access to (poor corp/alliance-mates), and people here had ISK that (presumably) would otherwise just be sitting there, so 6%/month is better than 0%/month.

Then again, I'm still pretty new around here, so maybe I don't understand all the ins and outs.

Akita T
Caldari Navy Volunteer Task Force
Posted - 2010.09.24 19:42:00 - [6]
 

Originally by: Vilgan Mazran
1) Why would you run a public IPO instead of just using the isk of friends/corpmates? Not only is it usually easier, but then the interest you are paying out indirectly benefits you as well.
2) Why would you give isk to an ipo/bond when the %s strongly suggest that the expected outcome is negative?

1) Why do it public ?
In the event my friends can't come up with the necessary amounts of ISK in the timespan I need them for. Not many friends will say "oh, sure, you can have those 10 bil ISK and pay me back next season", unless all your friends are filthy rich.
As was the case with my previous 69 bil ISK bond. Part of that WAS funded from friends with ISK to spare and at better rates than the public ISK.

2) Why invest in an IPO ?
Well, I personally wouldn't, since I can invest it better myself most of the time.
If the expected outcome is negative, of course anybody would be mad to invest. You only invest when the average expected outcome is positive.
Now, the fact that some falsify that "expected outcome" by presenting a facade of trustworthiness when they actually intend to scam, that's a different story.


But yeah, statistically speaking, about 80% of the IPOs/bonds you see on these boards are high-risk low-yield endeavours, and as such could be best described as "crud".

Induc
Amarr
Posted - 2010.09.24 20:33:00 - [7]
 

Edited by: Induc on 24/09/2010 20:34:23
Agree completely, I've never understood the reason for public offerings of any kind. The conclusion is that people who do run ipos/bonds either do it for fun/RP, or to scam (eventually).

The only exception would be very large operations, where a lot (10-100b) of cash is actually needed. Like pre-patch/expansion speculations (Akita T), or expensive stuff like cap building (T4U).

Vile Belief
Posted - 2010.09.24 20:56:00 - [8]
 

I was thinking about doing a bond sometime in the near future. The reason I wanted to do one is because I do play solo. I don't have friends to rely on to offer that kind of ISK. I also like the RP aspect of doing the whole IPO/Bond thing on top of providing people with good investment routes. But, one to it's own I guess.

Block Ukx
Forge Laboratories
Posted - 2010.09.24 23:39:00 - [9]
 

Originally by: Vilgan Mazran
1) Why would you run a public IPO instead ...

The concept of IPOs in an MMORPG is one of the reason I play EVE. Developing new ideas, like the Mineral Indices, short selling (coming soon), or the Stock Exchange is very appeling to me. My end goal is to take over the mineral market. I don't think I can do that alone; it requires a LOT of investors.

Originally by: Vilgan Mazran
2) Why would you give isk to an ipo/bond when the %s strongly suggest that the expected outcome is negative?

And people still gamble or play the lotto.

People used to invest in business plans, but like anything else in eve, it has been plague with scams. As a result investors moved away from investing in the plan to investing in “security”, when the fact is that there is no such thing as a secure investment. You should ask yourself, what is the CEO trying to accomplish? Is it worth investing in such effort?



RAW23
Posted - 2010.09.25 08:29:00 - [10]
 

With minimal attempts to sift the wheat from the chaff, the investment market is actually a pretty profitable place to put your money as long as you spread your investments around and do not buy into cults of personality.

As to the hassles involved to the offerer in comparison to raising the money privately, in my own experience I found the hassles to be minimal as long as you actually do the things that the market expects of you, don't try to take (too many) short cuts, and try to avoid acting in a manner that is isomorphic with that of a potential scammer (i.e. you need to think how a sensible scammer would act and then handicap yourself from that perspective).


Scott McClellan
Forum Posters Anonymous
Posted - 2010.09.25 08:30:00 - [11]
 

Edited by: Scott McClellan on 25/09/2010 08:31:18
I ran a public bond to get money, I didn't ask friends because I don't know a whole lot with any money. It was a bit rough at first, but my last (current) bond filled in 3 hours, I'd hardly call it painful.

What a lot of people do here (trade) works better with more money. I could work on the cash I had, but taking a public bond (even at 10%) is relatively inexpensive, and can net a lot more if worked correctly.


Consider the example of saving for retirement, the general thing people say for returns on retirement savings is if you start saving 5 years earlier, you almost double your money or whatnot. Throwing more ISK at your activities just kind of thrusts you forward in time, "pretending" you had that money to work with perhaps a month or two (or more) before you actually do.

Vaerah Vahrokha
Minmatar
Vahrokh Consulting
Posted - 2010.09.25 09:39:00 - [12]
 

Most of my friends quit (due to RL hardships, not because of EvE) and my own commitments forced me to leave my PvP corp Dark Rising as I told them I felt crippled and a weight on them.

So, when I needed ISK I could have earned 10-20B with my typical slow pace of someone who can play 1-2 hours a day, bought the capital BPOs I wanted, then researched them during several months...

Or I could have asked MD for money - which I did twice - immediately get the BPOs and someone to research them at day zero and have them ready in 1/3 of the time I'd need doing the above "solo" way.

The choice was a no brainer to me, I even got very reasonable interests for zero secured first requests.

Claire Voyant
Posted - 2010.09.25 15:37:00 - [13]
 

Edited by: Claire Voyant on 25/09/2010 15:44:06
Originally by: Grendell
My client came to me seeking a loan for about 225b isk.

Am I the only one who noticed this?

Edit: Never mind. I never read that thread.


 

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