Stocks & Valuations

Stock Ownership

• Creating a new company is an expensive undertaking. In order to exist, your company was funded by private investors who then hired you as the CEO. As payment you can receive 5% of the shares.
• At level 11 you can choose to "Go Public". This means the private investors start putting their shares up for sale. It marks the first time shares can be bought or sold on the stock market.
• Once public, stocks can be bought or sold by CEOs including but not limited to yourself. Owning a bigger percent of your company comes with additional levels of control. Companies can not buy shares in other companies.

Valuation

• People invest in businesses to grow their money. Therefore the value of a company is based on predictions of what it can bring in the future.
• Even before it goes public, your company is being valued by experts based on what it owns, what it has done in the past, and therefore what is reasonably expected for the future. After going public it can also move based on the predictions of buyers and sellers who are making their own predictions.
• The share price of your stock is simply the valuation divided by the number of shares. Having more shares at a lower price may make it easier for buyers with a limited cash, and if shares become too cheap then rounding errors occur. For these reasons your stock may undergo a split or reverse-split. But this doesn't change the value of the company, only the number of pieces it's cut into.
• The best way to increase your company's value is to run your company profitably and use that revenue to expand your capacity for future profit.

The effect of Tickets

• Tickets are a great asset for companies, permitting extra features or being sellable for extra cash. However, as an accounting asset they are problematic because when tickets are purchased from the system they are basically appearing out of thin air. Were cash to suddenly appear and disappear it would move stock prices unpredictably and undermine the accuracy of all valuations and stock trading.
• Simunomics handles this by treating excess cash received similar to how a private investment might be treated in the real world. A portion of the company equal to that cash is separated out from the common shares. Because it's a different class of equity it doesn't change the stock price or affect the share of common stock owned by any investor.
  
  Real World Example: Alphabet (Google)
  

  Since their restructure in 2014, the company Alphabet has three categories of stock

  
  

  • Class A shares are what are typically thought of as common stock. They trade under the symbol GOOGL. Owners have a claim to the company's assets and a vote in the operations.
  • Class B shares are only owned by the founders. They have a similar claim to the assets but ten times the voting rights.
  • Class C shares are traded under the symbol GOOG but have no voting rights.
• The Accounting Statement records the value of this special equity as "Capital - Tickets".
• If tickets are later purchased with and there is a value in Capital - Tickets, it will be reduced in the same way it was increased. Again, this avoids changing the price or ownership of Common Stock.
• If a company spends cash to buy tickets and doesn't have Capital - Tickets to deplete, then the value of those tickets is stored on the accounting statement as long as the tickets are owned.
• The Accounting Statement records this property as the intangible asset "Tickets".
• When the tickets are used, the asset is spent on the non-operating expense "Tickets Used" according to current market value. For Speed Boosts and other instant benefits the expense occurs immediately. For Gold or Platinum upgrades the asset is expensed over time.
• For both of these lines, the point is to standardize the money flow for accounting purposes. It is entirely possible to own tickets and have β0 on that line. That just means all of the money is accounted for. (Similarly it's possible to have an accounting value for Tickets even after they are used. This is just an accounting value and has no bearing on operations.)

• If this seems complicated, don't worry because all of the accounting is handled for you. Just know that you can never hurt shareholders (including yourself) by buying tickets from the system. Stock price and percent ownership of the company will not be changed.