Realistic valuation and financing (and private equity strategy)

[fritsjaap]

In reality, business are able to lend up till a certain multiplier of EBITDA, depending on its solvability/securities and set by banking covenants.

In addition, business valuation now is a bit weird. Company value can drop to 0 or negative after paying out special dividends from loans, even though the earning capacity is unchanged. That's why I think valuation should be based on a combination of earning capacity and equity. Now equity is valued too high.

By having this fixed, you can encourage private equity like processes: players buying companies with dept, making money by paying out dividends and risking the continuity of the company by too high leverage. This could result in more consolidation by mergers and/or bankruptcies, creating new opportunities for new businesses.

[David]

Company value can drop to 0 or negative after paying out special dividends from loans, even though the earning capacity is unchanged.

We will investigate the problem.

Could you please provide us with your save game file and let us know the following?
1) Which version of Capitalism Lab you are using. You can see the version number on the top-right of the main menu.
2) The exact steps leading to the negative company value in the save game
3) If your savegame uses a MOD, please let us know the name of the MOD and the MOD's version number.

You can find save game files of Capitalism Lab from:
C:\Users\<your user name>\Documents\My Games\Capitalism Lab Post-Release Beta\SAVE

You may provide us with your save game file by posting it here on the forum as a ZIP file attachment or emailing the save game file to us at info@enlight.com.

If your save game file is too large for attachment, you may check out this post about how to send us large files: https://www.enlight.com/forum/viewtopic.php?f=13&t=2473

[David]

In addition, business valuation now is a bit weird. Company value can drop to 0 or negative after paying out special dividends from loans, even though the earning capacity is unchanged. That's why I think valuation should be based on a combination of earning capacity and equity. Now equity is valued too high.

The fact that the IPO stock price is limited by the book value is mainly for blocking a loophole where the player could create a subsidiary, then launch an IPO for it, and later on earn a windfall profit when merging with the subsidiary company again or privatizing it.

I recall that the game did take into account of the profits for the IPO price in the early phase of the beta-test of the Banking DLC but the dev team finally settled for this formula in view of the need to block the loophole. 

In addition, this loophold would have made it possible to artificially inflate the profit of a subsidiary through various means prior to its IPO, which will in turn inflate the IPO price.

If you have a suggestion for implementing it differently, I would recommend that you create a poll for your suggestion to gauge the community's interest in it. There would be a higher chance that the dev team will implement it if the interest level is high. 

You could see some examples of the polls in the Suggestions forum at viewforum.php?f=14

[cantdownloadit]

One think i find strange is you can found a company and immediately go IPO without it even trading,