Market Discussions

The collective knowledge found in the Market Discussions section of the forum is quite impressive. With that in mind, I have a question about IPOs - What percentage of them do YOU think are scams?

I'm just looking for people's opinions about IPO's - you don't need to back up your answer with facts unless you want to and please don't be mean or rude if you disagree with someone else's opinion (respectful conversation helps to keep the discussion on track).

I don't have any personal experience with IPOs myself, but I am fairly skeptical of them (I admit, I'm a cynic). Although lately, I do admit that some of them are well done and appear to be legit, so I'm starting to second guess my cynicism a little.

Obviously an IPO offered by a reputable businessman will have a much lower risk than on offered by a six week old toon with no history, but I'd rather not get into those types of specifics. I'm talking in general terms and am looking at all IPOs (good and bad).

Disclaimer: These statements are coming from someone's who's IPO topic is currently listed directly below this one


Before I attempt to answer your question I just wanted to make sure that you knew IPO simply means an Initial Public Offering. Basically it's just the first opportunity for the public to buy stock in a company. So I think what your really meaning to ask is what percentage of publicly traded companies turn out to be scams. And to be absolutely honest I would say probably less than you expect and this is for multiple reasons. First off if you were wanting to scam people doing it through the means of a publicly traded company would not be ideal. I say that because outside of the initial capital raise you are seriously limited to the amount of outside money you can take in. Which means outside of stiffing your investors by simply pocketing all the profit you made off their money, your really not gonna get away with a ton of easy cash.(The big exception to this is the Titans for You scam). However with that stated, if you were to start an investment fund you would be able to raise as much money as people were willing to give you, and even be able to drag the scam out by operating it as a ponzi scheme. Paying old investors with a portion of new investors money while pocketing the rest. This idea is illustrated pretty well if you take a look at some of the bigger scams in EvE(again with the exception of the Titans for You scam) most finical scams have been Banks and funds, not corps.

To be absolutely honest with you though, if I were you I'd swap out my cynicism for skepticism The reason being that even if 99% of IPO's were legit(Which they are not), if you simply banked on the fact that statistically you should probably be alright then chances are you are going to get scammed. Your best bet is investigate and weigh each separately and then make a judgement for yourself whether or not an investment is within your tolerance for risk.

@Garen Sobek - I think you were posting on my thread at the same time I was posting on yours

My question really is specific to IPOs. As you said yourself "Outside of the initial capital you raise you are seriously limited to the amount of outside money you can take in". So yes, you get handcuffed AFTER you raise your capital. But during the IPO phase, you're very free to accept money. Seems like the perfect time to pocket the money and run is after you've sold all your shares, but before the first dividend payment is issued.

I had to look up the definition for skepticism (I'm not too smart), and I remain a cynic in New Eden. When I doubt something is true, I usually think the reason for the incorrect information has to do with self interest (scams and such). Sure, people make honest mistakes from time to time, but to think that all those 1 million ISK Gecko contracts listed in Jita local (the ones that actually sell for 1 Billion) are honest mistakes is folly in my opinion.

And again for the record, I don't think you or your IPO is a scam. I do have concerns, but I believe you are being honest and sincere.

0% are a scam.

ps: I'm having an IPO! Join today!

I'm very interested in starting a stock exchange, and as such the majority of EVE-Mogul fundraising efforts will utilize IPOs. I'd love all the input from everyone as possible to keep things safe for everyone. Collateral is obviously something that would be a way to make it safe to invest, but I'm also thinking of some sort of "default insurance" built into the stock exchange. IE: If you want your IPO listed in the stock exchange, you pay a premium to get it listed. This would be pooled into a wallet, and act similar to an FDIC insurance.

Of course, the benefits of being listed must outweigh the costs and in EVE not sure the higher default rates would be worth it.

I have a couple of questions for you about the proposed "default insurance". The first is would the payment you make to get listed be a one time payment, or reoccurring payments over time to keep your company listed? If it was reoccurring payments and the company stopped making payments would the shareholders lose their insurance? In addition would this payment be a flat rate or be based on a percentage of the companies evaluation? Also would the insurance only cover the initial share price of the company(only protecting initial investors) or would it cover current/future share prices(protecting investors who came in later). For example, lets say I purchased 100 shares of a company for 1M isk a share. Six months later I sell 50 of those shares for 3M isk a share. Would the shares he purchased from me now be insured for 3M a share?

I think your idea is incredibly interesting and would be extremely interested in listing Sobek Capital on the exchange if you get it up and running. With that being said I think your 1# obstacle is going to be having to implement some type of audit system. I believe there would be a number of players who try to commit insurance fraud by creating companies, paying your fee to list their company and get it insured, sell all their shares to their alts, default on their investment, collect the default insurance on their alts.

If you need any help brainstorming this idea, please feel to hit me up either in game or on here.

V/R

Garen Sobek
CEO, Sobek Capital

As far as the person who runs the exchange running off with the insurance money, my guess is that the best way to handle it would be to have a third party like Chribba hold the isk. That way the insurance money would still be paid out even if it was the owners of the exchange who were perpetrating the fraud.

I don't see how it could be managed by ingame mechanics. Sure they could have a stock market, but there is no way for them to offer any type of insurance without it being highly exploitable. Without any type of guarantee its highly unlikely many players would use it.

I've had a bond (120b) and two short terms loans (about 30b each time I think) all filled & paid back in past few months periods. But I know that this won't mean people will trust me any 'more' if I offered another investment opportunity asking for ISK.

As I see it, track records & past histories don't mean much when it comes to investing here on MD. The value of the collateral & trust worthiness of the Third Party is the king. Including me at the time, I have seen a few people easily raise a few tens of billions to over 100b with Chribba as the third party & the person offering such bond was doing this for the first time. But if it's ISK vs. collateral, you could argue that maybe it's not technically an IPO, but more like pawn shop money. :p

But the funny thing with this is that although Bobby has been one of the famous scammers here, he does invest in other people's stuff when there's right collateral for it (he did put isk in my bond before) and I would not hesitate to invest in his things if there was collateral attached to it with Chribba. So that goes to show the numbers/histories don't mean much when it comes to suspecting a scam.

Also, I've said this long time ago, when there were some mini-stock trading thingy going on. (that was like 2010 ish or something I think :p). The idea was that people traded corp shares through mailing list and you could place buy/sell orders and there was someone tracking it and such (I really can't remember what this was called). Some people suspected it's a scam, and I don't remember if it was as I pulled out much earlier than the whole thing disappeared, but my theory was always that it didn't matter if this was a scam as long as you could sell your shares to someone else before it collapses.

The same can be said for any ponzi scam. If you feel confident/stupid enough to risk, you could make money off the scam while knowing it is a scam. As long as you pull out your money before the scam collapses, you probably make some good interest on it that the scammer would have used to attract investors. It's the late comers and people who didn't pull out at the right time that get screwed. If someone is running a 10% profit ponzi scam and I pull out after 1 week with 10% profit, and the whole thing collapse the day after I pulled out, I would have made ISK.

I think Toobo's point is that he and PP are in different groups. Toobo's bonds were collateralised, so he didn't 'earn' any trust from them as he couldn't have betrayed the trust in the first place.