Let's Talk Virtual Stocks!

Like I said, let's talk virtual stocks! I'm very interested in generating some discussion about the exchange and it's first listed company by the community of potential exchange investors out there. It would also be great if some of the people who are just watching with great interest, but don't classify themselves as potential investors at this point, could chime in and add to the discussion!

I'll kick off the discussion by providing a little background commentary and posing some questions to the community. Hopefully most of these questions will be of the tough variety, and will also lead to other tough questions! We can talk about both Cyberland and the stock exchange in general.

Cyberland is holding its first shareholder meeting on August 12 at 7:00PM SL time. For anyone interested, that meeting will be held at Cayuga (236, 21). At the time of this posting, Cyberland had 359,750 shares already outstanding, representing L$3,172,995 in total, up to the second asset value. Given that all of this has happened in a time window of roughly 1 month, you can probably imagine that we have some pretty important things on the itenerary for this meeting! Chief among them is the revenue report from listing date until today (close of tier cycle).

What I'd like to know though, at least for purposes of kicking off this discussion, is what kinds of things would YOU like us to touch on at this meeting and at future meetings? What would make you likely to attend and learn more about what's going on? Beyond that, what kinds of things could we address to make our operation more transparant, possibly less centralized and more to your liking without also subjecting you to an undue level of risk?

Regarding the stock exchange in general, when evaluating the phenominal success of Cyberland's new public share offerings to date, it seems like the exchange is an institution which, for better or worse, is probably here to stay. With this in mind, let's make it for better!

There are a few things that I'd like to know about the stock exchange in general, again for the purposes of kicking off this discussion. As the exchange continues to evolve, it will continue to need to be open and accessable, preferably with a large board of directors. I think that both directly vested and non-vested, non-managment directors would be best for this. What do you think? If you like this approach, how should one go about becomming a director of the SLSE, regardless of if they intend to own equity in it or not? If you dislike this approach, say why!

Once the SLSE has established directors, they will need to define the regulations by which the exchange governs listed companies. They will also need to provide at least some level of oversight/enforcement to ensure transparancy and integrety. In your opinion, how could this best be accomplished?

We just need an SL-SEC, now

Joke aside, it's about time capital investment made it into SL. There are a number of people here who have time and talent to turn lots of L$ into yet more L$, but who can't because of lack of funds, and also a number of people with somewhat large piles of cash and a desire to help out the former for their own share of the profit. And of course there are also lots of people ready to buy/use interesting, new products and services to make all this happen.

I don't see any way in which one can abuse a monopolistic position in SL, and there's hardly any barrier to entry into any market that I can think of (but I don't have investigated this much, are there powerful groups of mall owners that hand-pick the content producers allowed in their malls, for example ? Or a union of escort services providers that exploit newbies ?). So the free competition side of things is OK I guess.

You can limit your own financial liability by using an alt account, so this aspect is covered too...

But there is little to no fraud protection for your shareholders We're back to the SL-SEC thing, then. Would LL take upon this role in the long term ? Or would multiple private entities do ? I'm sure there will be fraud insurance once stock exchange becomes familiar in SL.

Not sure, if this is the same in the US or where ever but in the UK the goverment has nothing to do with the stock exchange, the only thing they cover is the records kept by the actual company. A recent Oil company is a good example of that, they published they had loads of oil in reserve (stock goes up), they then say they were wrong, (stock goes down), stockholders who bought high scream blue murder, but the UK goverment only challenge them about getting their books wrong and thats it. the oil company pay the goverment their fine for the fib and stockholders still scream blue murder, but they get nothing ! In fact cause the oil company pays the goverment money their stock drops even less....

So should LL hold any Liability over the stock exchange or any company if it goes bankrupt then the answer should be no!

I'm an investor in Cyberland and understand that the money I've invested is in the hands of another person (if I couldn't afford it then I shouldn't take the risk), and I have to trust that other person, that they will report the right figures and they are not taking a cut for themselfs. And until Cyberland screw me (and I see proof) then I'm taking the risk!

I love the way the SLEx is set up, it allows me to see full stock holdings, the market, the stocks outstanding and the liquid value. Normally you get this once a year at a AGM but this allows me to measure my risk. I also note what land is being held how much its worth ( not spying looking after my investment) and when it gets sold and so far every penny I see comming into the compnay from people buying the land is going into that bank account in the Cyberland company market.

I also agree that the owner can hold the golden share(50.1%) of a company, again its my choice to trust they will do the right thing for the company.

I'm just holding the notion that I (MISTER AMBASSADOR) who sold all his land before the land crash (64,000m2) is back to being a land baron!


Long live the revolution

(if the first paragraph is unreadable, sorry, I change the name of the company just in case there is a lawyer present! LOL)

I was just thinking of book-cooking, really. If your investee sells your L$ on GOM and drops dead you theoretically have no recourse, but I think the current trends of events show that LL does care about such scams, so they might get involved a bit further regarding published numbers. The best solution IMO would be that they open up all sale stats for all publicly traded SL ventures.

first let's have lawyers and notaries, with the justice system that goes with them. Then let's have liabilities and a lawful recourse system to bring binding dispute resolutions. Then you can bring the stock market and any endeavor which demands people trusting anonymous strangers with their cash...

There is a perception that the only thing that can go wrong with an investment in a company is fraud. If only we can prevent fraud, everything will be wonderful.

Its actually a little more complicated than that, because dishonesty is not the only issue. Often, in business, things do not work out as well as expected. Costs are too high, sales are too low, competitors appear, disasters strike, people get distracted, and interpersonal conflicts cause people to act irrationally. All of these things can destroy equity.

It is natural for business operators to "put the best face" on a situation. In order to sell your product, you have to project an upbeat message. When there is a problem, no matter what it is, people naturally try to solve the problem without anybody finding out about it. Sometimes they make a change and the problem goes away, everybody is happy. But sometimes the problem snowballs. Caught in the midst of it, business operators are often in denial, not appreciating the gravity of their problem until it is far to late.

This is why independent oversight is needed. To invest in a new company, you need more than confidence in good intentions -- you need monitoring so that you can understand how risks change over time.

If you are investing play money in a pretend company, then of course you can afford to be a lot less rigerous. But I think that when something like a "stock exchange" or "public company" is presented in such earnest, some people are likley to take it very seriously. Those people will be unhappy if things don't go well. (Wether they have a right to be or not doesn't matter, they WILL be unhappy if things don't go well.)

Also, never underestimate the tendency for troublemakers to make trouble.

Buster

Strictly speaking, that isn't exactly true. It is illegal in the UK, just like all developed countries, to defraud investors by knowingly making false claims about the prospects for a company while offering shares.

Its perfectly OK to turn out to be wrong. But you can't knowingly lie.

Laws differ from country to country on whether specific acts create criminal or civil liabilities.

In the US, the government does not own any stock exchanges (or even the central bank!) But there are regulations, of course.

Buster

Hi all,

I think replies to some of the discussion so far would get into things that I'd also like to say during or discuss after the Cyberland shareholder meeting tonight, so I won't respond publicly just yet! I am watching the thread though and this is shaping up to be a very good discussion. I will be back after tonight's shareholder meeting to offer some of my own thoughts in reply. In the mean time, let's keep the conversation rolling!

Wouldn't a flood of 300km2 drop the sale price of land below 5L$ per meter, adversly effecting the "Share Liquidation Value"?

How much do newly released shares cost?

Where is the historical market data?

And what about Sarbanes-Oxley compliance ?

well right now it is clearly "buyer beware".

Full disclosure would have to say that these are not companies incorporated in the real world with RL assets or RL legal obligations, nor do they have auditing oversight. (BTW -- if you *are* a company incorporated in the RL, I would consult a lawyer before trying to offer securities to the public over the internet/secondlife to US investors, because you could end up in hot water with both state and federal regulators).

I agree that for an efficient capital raising system we need more legal recourse options within SL, but I am intrigued by shaun's attempt to pioneer a market exchange for SL-related equity and possibly debt instruments.

IF there are enough people that accept this state of "buyer beware" then a fledgling market might just get off the ground. The other "IF" is that there needs to be enough interesting companies run by people old and famous enough that an investor base will trust them.... because that trust is all they've got.

I am all for letting people be adults. If the risks are clearly, clearly stated, then what people do with their L$ is their own business. They can gamble on a virtual stock market all they want.


The businesses who list on an exchange, and the leaders of the exchange(s) itself, have a serious incentive to self-regulate -- because all it would take would be for one scandal to taint everybody.


As for sar-box, hart-scott-rodino, or exxon-florio... LOL!

Shaun, I promised I wouldn't tease you anymore, but given your description above, I *still* don't understand what service you are offering. I can't say that your idea is good or bad, but I do recommend you get someone who can better describe what you are shooting for. Good luck.

Hey all,

I'm watching this and I'll be back to the the thread soon, honest! I'm just trying to find an hour or two to sit down and write everyone a reply. Sorry for the delays on my part.

Hmm.



Agree. Well, obviously!



I agree with this too. I don't see the exchange as a threat to the free market.



I'm not sure what you mean here, but I'm not big on alt accounts for any purpose other than ensuring my land groups don't dissolve. Could you elaborate?



I'm not sure if LL is planning to do something like this or not. It would likely require a dedicated staff of more than one person. If I were the person who had to make that call, I probably wouldn't pay multiple salaries to provide something like this unless the exchange were in turn paying my company for the service. This approach obviously has several problems of its own.

First off, the exchange itself isn't in a financial position to do this just yet even if it were an option. Second, LL has the same problem here as they do in other areas. They must provide solutions which not only ARE fair but also APPEAR to be fair to all residents. An approach such as our paying LL for auditing services may foster the appearance among some residents of us being a "mafia" type organization with "government officials" on our "payroll". So, the idea of the exchange offering any type of compensation is probably off the table.

That said, if LL were to begin doing auditing type activities the exchange would likely cooperate with this even if it were voluntary. I don't forsee much of a problem getting something like this past Cyberland's board of directors either. Honesty, integrety and the maximum level of transparancy consistant with good business practice are the foundation upon which Cyberland was built.



I think that this is really the best way to go. If LL could provide the TOOLS, we could likely do this on our own even long-term.

An approach similar to this is the direction that I'm generally moving in at the moment. The first step towards multiple private entities is of course a board of directors for the exchange itself. I would like to build a large board comprised of both vested corporate interests (at the stock exchange level) and also non-vested interests who would in fact be FORBIDDEN from owning any portion of the exchange itself. This board of directors will initially be responsible for laying down the rules regarding initial listing of virtual securities, continued listing of virtual securities, and the exchange regulation/oversight criteria that listed companies are required to comply with. Mid-term they will be responsible for providing said approval and oversight within the established peramaters, and also adjusting those paramaters from time to time when a clear need to do so arises.

I'm really not sure how to take it to a level higher than the exchange itself and get to a level of "multiple private entities" in any short period of time. I think that exchange directors are going to have to do for the forseeable future. I am actively LOOKING for a diverse group of smart, creative thinkers at the moment to fill this role however. I'm confident that if we put enough minds together who are capable of arriving at dynamic, forward-thinking solutions to complex problems, we will be able to succeed.

What we need to do most right now is to STUDY how both various stock exchanges and government regulators provide this type of oversight IRL. Then, we need to decide how much of this we actually want to get into. Then, we need to put two lists together, one being oversight that we can currently provide within the existing framework, and the other being oversight that we could OPTIONALLY provide via additional tools provided it was volunteered to. Perhaps if our toolset proposal is good enough, LL will give us what we need to accomplish some of the things that just outright can't be done within the existing framework.

By the way, if any of you reading this thinks that the above description sounds like it might be you, and you also feel like this project is something you're interested in being involved with long-term, please drop a NOTECARD on me IN-WORLD and tell me WHY this is you and WHAT you have to offer. Please be honest, I'm looking for a group of people more diverse than you likely imagine.

At the end of the day though, its really up to individual investors. No amount of oversight that we can EVER offer will be good enough that we can be all things to all people. Things happen. Just look to Enron for one example of things happening.

Life is nothing more than a complex set of decisions, possible risks, and possible rewards. All that we can ever hope to do is CONTAIN this risk at a level that is acceptable to investors. If the individual prospective investor decides that we provide enough risk mitigation for them to be comfortable owning and/or trading virtual securities in virtual companies, they will use our exchange as the platform through which to do so. If not, then they won't. All I can say for certain so far is that people seem to be cautiously optimistic in general.



Hmm. This is interesting, but probably a highly complex institution in and of itself.

Can I be a non-shareholding Board member ? I could use more titles on my business card

At the end of the day I think you are correct that there should be no liability. Whether there should be official oversight by LL is an issue which should be pondered in greater detail though.



Thank you for your confidence. As an early adopter you will likely see rewards that unfortunately won't be available to the last investors through the door. While the stock price still does remain cheap, we've seen some early evidence of this already with Cyberland's secondary offer price doubling after the first revenue report was put out.



Thank you for your comments on the exchange setup. I still have some small issues that concern me as far as how data is presented, where it is presented and at what level it is presented. As far as company data, yes Cyberland definately provides company financial information at a MUCH faster pace than it would be available IRL.

It is important to note one thing though, which is that not every penny from land sales revenue ends up back in Cyberland's bank account. Some of it ends up in my hands and some of it ends up in the dividend holding account. These things are documented on the exchange's fees and dividends page, but every penny that is SUPPOSED to end up back in Cyberland's bank account definately does.



True, both IRL and on the Second Life Stock Exchange.



Indeed, Cyberland does allow every resident the possibility of becomming a land baron via holding Cyberland stock for dividend returns.



I'll second that!

The stock exchange is already upon us. Unless Linden Lab makes the decision to consciously, actively, and without option shut it down, it will remain. Now is the time to stop posturing, pondering and hypothesizing the possible future of investment in virtual companies in Second Life and begin the process of devising creative solutions to the complex problems which confront us.

Your concerns are all very valid and I agree that they need to be explored, but this "endeavor" has already arrived on the scene. The stock exchange is live, virtual securities are being traded in Second Life and the first virtual company to go public is already worth around $16,000.00 in USD terms. Now it is time to both decide what this new enabling platform will MEAN to various aspects of the Second Life economy and to begin solving the complex problems which lie on the long road still ahead of us.

edit: whoops, duplicate post!

I agree with all of this.



I agree with all of this too. At the end of the day, investments are risks. Each individual must evaluate the possible rewards against the level of risk and decide if they make sense personally. Cyberland doesn't attept to put any face on any situation or do things in the dark. Then again, all that's backing this statement at the moment is the good faith of its directors. That's acceptable to some and not acceptable to others.



I agree with this. 100%.



I take it very seriously, as do Cyberland's directors and (as far as I can tell) shareholders. OF COURSE poeple will be unhappy if things don't go well. I've got enough of my own L$ also tied up in this to be pretty comfortable saying I'd be at the top of that list.

The land aquisition cost given on our market data page represents the price we've PAID for land. We are very pessimistic in how we value land on inventory. We consider it to be worth what we paid for it until it sells, at which point the sale value ends up reflected in the cash reserve. The land aquisiton cost is what the share liquidation value is based on, at least as far as the land inventory part of that equation goes.

Yes.



Yes, mostly. Interestingly Cyberland may have already found a way to provide very high-level (and agreeably of limited use) external auditing of at least gross land sale revenue. It turns out that we can just invite someone to the land group for a moment, in our presense of course, and as a member only of course, to go through the "money" list in the group and verify the numbers we're reporting for the month. We tested this internally with a director before the last shareholder meeting and it seemed to work well. All the money seemed to still go to the right place the next time the group paid out.

Auditing of the low-level finer details which will be available in future financial publications remains a challenge. I suspect that this area is going to require a lot more thought and/or work. But, gross revenue is a start!



I don't know a lot about this and can't say for 100% certain, but I am fairly sure that both the exchange and the company in question would have to be RL companies with all of the i's dotted and t's crossed before this might be possible. Even then it may not be possible. I'll yield to those who know more about this aspect to discuss it and try not to offer to many farther opinions in this area.



Thanks! All roads have to start somewhere. Who knows for sure where it will end up!



Agree.. for the time being at least.



I agree here too.




Very true!

What if LL were to open up all acquisitions and sales data from publicly-traded (even if it's on a private stock exchange marketplace, it's still sold to the public, right ?) companies / investment funds ? Would that constitute a SEC-like enough service ?

I agree that we probably need a skilled public relations person for the exchange and possibly one for Cyberland as well. I am not much of a salesman. With that in mind, its probably a good thing that I'm not trying to sell anyone too hard on the idea of investing! But, a public relations person or people may prove valuable in conveying our message more clearly than I may be.

I'm sorry that I wasn't able to adequately explain the concepts behind this in my last post to you. I'd be delighted to take some time to sit down with you in-world and talk a bit more about what I am trying to accomplish and our short, mid and long term goals for these projects though. Please do shoot me an IM if you'd like.

Quite possibly! Please see my instructions in a previous post though.

Probably not. It's harder than that I think.