Football Index Bank Builder
Challenge: £2,500 to £10,000.
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The Share Split Guide
In the last few weeks, there has been increased discussions on Social Media regarding a Share Split.
If you aren’t aware of what a share split is, this guide will be perfect for you, as I will be discussing this at length.
What is a Share Split?
A Share Split will occur when Football Index come to the conclusion that Footballers prices are reaching levels which is potentially discouraging members from purchasing.
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For example, Neymar is currently £13 to purchase, this could potentially discourage new members from purchasing him, as a lot of traders will be depositing ‘recreational’ amounts, up to £100.
If a trader deposited £100, they couldn’t even get 10 Neymar Shares!
This is the reason that the Share Split discussions have been increasing recently, Adam Cole even discussed this at the Birmingham Trader Meet.
When a share split occurs, your players value will be halved, but you will receive double the shares. Dividend Payouts will also be affected, halving too.
Essentially, nothing will change for players that you own, I will run an example off showing that you won’t make or lose any extra money.
Prior to Share Split – You own 1 x Hector Bellerin (Priced at £1 for Ease of Calculation), On a Treble Day he can earn £0.12 per share for Top Defender.
If Bellerin wins Top Defender, you will receive 1 x £0.12 payout for the share that you own
Post Share Split – You now own 2 x Hector Bellerin (now priced at £0.50 due to Share Split), On a Treble day now he can earn £0.06 per share for Top Defender
If Bellerin wins Top Defender, you will receive 2 x £0.06 payouts, as you now own 2 shares.
Both totals equate to £0.12.
To Confirm, a Share Split doesn’t mean that your dividends payout WILL be less, although it looks on the surface like they have HALVED. This is because the Share Split doubles your Shares.
It’s vital that you understand that the dividends payout will be halved, as many traders will think this means that Football Index are reducing the payouts, when in fact they have doubled the Shares you hold, meaning everything stays exactly the same.
Share Splits will be a new thing for lots of traders. I didn’t fully understand them when I joined. I have no trading background before Football Index, so a lot of terms were new to me.
The biggest misinterpretation with the potential Share Split on Football Index, is that some traders think that Football Index would Split Shares, but keep the dividend payout the exact same. There is less than 0.00001% chance in this happening, Football Index has stabilised recently, players are worth what they are due to their dividend potential.
For example, let’s use Bellerin again, you own 100 and he’s priced at £1, a £0.12 win would bring (£12) 12% Return on Investment, which is quite high, but relates to the chance of him winning dividends.
A share split which kept dividends the exact same amount would thus double the Return on Investment of EVERY player on the Index.
You now own 200 Bellerin at £0.50 a share, a £0.12 win would now bring in a 24% Return on Investment.
As much as I would love them to keep dividends the same, it’s not going to happen.
It would lead to a complete frenzy on the Index, as I mentioned above players prices are stable, and sitting near their expected price : dividend potential ratio. If they were to keep the dividends the same, we will essentially see the players share prices DOUBLE to the level they are at now already.
I personally would take a loan for a million pound if this were to happen, as players prices would be guaranteed to double to the level they are at now.
But, I need to confirm DIVIDENDS WILL BE REDUCED IF A SHARE SPLIT OCCURS.
Advantages of a Share Split
There are many benefits to a Share Split.
- All players on the index instantly gain ‘eye value’. With traders having seen Neymar at over £13, they would snap him up at £6.50, regardless on the dividends on offer. Neymar has increased £2 since being injured, yet only won media buzz once!
- It attracts new users. A lot of traders on Football Index come from gambling backgrounds. They aren’t going to be able to add Thousands at a time, so it would be more beneficial for recreational traders to be able to add players at lower prices.
- A share split will also help the further growth of the Index, which means more money in the Index and ultimately, profits all around!
As the index grows, the F.I Bosses will need to keep traders interested. Ultimately, I can see a share split coming, then in the distant future, they will double the dividend payouts again, this is the natural way to cope with the Index growth and keep all traders excited
Drawbacks of a Share Split
- Dividends are reduced. This won’t matter as much to existing traders, as your 100 Shares in Neymar at £13, now become 200 at £6.50, which mean dividend payouts are the same. However, if you’re a new trader who is used to placing exhilarating accumulator bets to win Thousands, would you be excited by a potential 1p dividend win?
Ultimately, I think that new customers would be disheartened to invest so much money for a 1p return, EVEN though it’s the exact same as paying double the money, for double the return.
If there’s a £0.01 dividend return on offer, I cannot see players achieving £10+ with ease, as the Return on Investment wouldn’t be worth the risk. (Although, there are still higher dividends on offer than the 1p I must add)
Reduced Dividends aren’t as exciting for New Traders, but the Index has coped well with Share Splits before.
Ultimately, this will happen as the natural growth of the Index would put players at £20+ without it!
Thanks to all the Twitter users who have contributed towards this post with their insight and opinions.
For the record, 76% of Traders voted FOR a share split.