Investing in Portalarium?

Virtually none. Unless you count me walking in and out of the town.

It is still the largest PVP POT in the game though. I don't know if there's another PVP metropolis, but if there is there's not one with as much housing. That's how I'm measuring the size. Metro + Possible Housing.

As for activity, I'm not going to make excuses. But I will say that overall the population of the game is very small and I'm not sure many towns have a lot of "activity". I will also state that PVP as a whole is lacking in some very important ways that I've outlined here. I don't believe it will be "active" in any meaningful way until most of these items are addressed.

 

I suppose, unless a round of 5m in the beginning needs paying back. Its all semantics. Technically, all the money is going towards the development of the game. I'll leave it here bc I dont want to make any false or inflammatory statements.

 

It's not semantics actually. It's very clear that they said that was not happening. Of course we can't see the books, we can't verify any of it, and that leads to some healthy skepticism, but also a lot of wasted motion. When we pledged the money to the game we didn't inherit a lot of rights with that donation.

So the point I'm trying to make is that you either pledged and made peace with the inherent risks or you didn't. Either way, it's not going to do anyone any good to over speculate with a lot of "what ifs". Personally I have a lot of belief that Portalarium has been and will continue to act in good faith. For anyone that has doubts about that, there's a very robust secondary market where you can sell off your stuff and cut whatever losses you feel you need to cut. That seems like a mature way to handle it to me.

But I'm having a blast in the game and I enjoy the changes that are made each month, I think we're moving in the right direction. For such a small team with very aggressive goals, I'm proud of the game that's being built and happy that I had a part in funding it. Now if we could just get some decent robes.

 

Thanks for sharing this @Baron Drocis Fondorlatos. It was very interesting looking at the investment opportunity and the financials of ArtCraft Entertainment.

After reviewing said documents, this would be a terrible investment for a number of reasons. Some of which I have outlined below for folks to review. Hopefully, this will help explain, albeit very succinctly...why.

Overview:

First off, let's make sure folks understand what they are getting and the structure of said investment. This is a Series Seed - 3 security that would allow the investor the opportunity to buy the underlying "preferred stock" at the set price of $1.1173. A seed financing typically involves a relatively modest amount of capital invested to fund the investigation of a market opportunity or the development of the initial version of a product or service. Seed financings are often provided by the founders themselves, “friends and family” or angel investors, as the case may be here. The "3" denotes the tier or round, meaning this is the third time they have offered this type of investment.

The preferred stock being offered, is a class of stock that provides certain rights, privileges, and preferences to investors. Compared to common stock, which is normally held by the founders, it is a superior security and in an investment of this nature (venture capital/angel investors) is usually demanded by investors due to the inherently high risk and lack of a traditional market.

Problems:

Anyone who read the the Form C of the investment documents will quickly be able to ascertain the reasons why this is a bad investment or at a minimum an extremely high risk one. Having said that I will break down the top reasons, why I believe, this is an investment folks should pass on. Again, all of this is disclosed within the investment documents and is solely the opinion of myself and no other financial institution or paid investor.

1) Financials - Looking at the technical's of any investment should always be the first step when analyzing a potential opportunity of this nature. In this example, ArtCraft Entertainment has been hemorrhaging net losses for the past two years, with all incoming capital coming from "crowdfunding" or the past two rounds of Series Seed funding. Now normally, this in and of itself should not dissuade any potential investor, especially since most of the expenses are going to research and development. This is very much in line with Pharmaceutical companies. The problem here is the lack of any form of capital assets (in the case of bankruptcy) and the lack of any diversified product. Meaning that the company lives or dies by the success of this game alone. For example, Activision Blizzard (ATVI) has multiple revenue streams, including now their own publishing arm. The company wouldn't go bankrupt if say Overwatch bombed and even if they did go bankrupt dependent on restructuring they maintain capital assets which could go to repayment of investment (this is rare but does transpire occasionally).

2) Tier III Investment - This is now the third "round" (fourth if you include initial founder/friends round) of Seed Series financing they are doing. The first two (Series Seed-1 and Series Seed-2), according to Form C, had the initial price per share (pps) of $1.0427. Meaning, this current round is an increase in pps of $.0746. The reason this raises a red flag is because usually when private enterprises seek further rounds of funding from private investors (aka "Angels" in this instance) in order to raise new capital, the price is either the same as the previous rounds or only very slightly increased. The only circumstance where an increase of this level makes sense, is if the company was seeing significant success in another product or by restructuring their finances to increase revenue. Neither of which is happening here, which means they are relying on the "ignorance" or "emotional eagerness" of their investor to buy in. Furthermore, they are charging a transaction fee of 7% on said investment. This is not abnormal but would further dissuade me given the aforementioned issues with the financials and that this fee is usually "eaten" by the company to incentivize investment. Meaning, that for your $100 investment you are really only getting 83.24 shares instead 89.5. Finally, if they are doing a third round there is a very likely possibility that they may do a fourth or fifth. The explicitly delineate within Form C their right to do so without stockholder approval. Further such rounds would thus cause the stockholder to experience more dilution of their ownership of the company reducing their potential pps when trying to exercise the underlying.

3) Restrictions on Sale & Lack of Market - This is perhaps the most important part of why this is not a good investment, again in my opinion. Firstly, ArtCraft Entertainment requires that you "hold on" to your preferred shares for a minimum of one year before you can exercise them for a potential ROI. This isn't abnormal either but it is an indicator that the company is wary of possible "skittish" investors due to the volatility of the risk. Secondly, there is no public market (NASDAQ for example) for sale of this preferred stock! The reason for this is because the Series Seed-3 Preferred Stock has not been registered under the Securities Act or under the securities laws of any state and as such the Series Seed-3 Preferred Stock has significant transfer restrictions that disallow it to be resold in the United States except pursuant to Rule 501 of Regulation CF. LOL...what does that mean right? Basically, they have to say this because they are not a publicly traded company and by their own admission MAY NEVER BE. This is important because it shows the illiquidity of the investment. A liquid investment is one where you can easily get in or out of your position relatively quickly. Since this preferred stock is not publicly traded on a market like the NYSE or NASDAQ (remember it's not a publicly traded company and therefore would not be listed) your options are EXTREMELY LIMITED as to how to exercise the underlying. Unless ArtCraft Entertainment offers an IPO and goes public the ONLY WAY to recoup your investment is by selling the underlying stock within the private equity secondary market. This secondary market refers to the buying and selling of pre-existing investor commitments to private equity and other alternative investment funds, given the absence of established trading markets (NASDAQ for ex.) for these interests. Although, this is a $40 billion plus market annually, the number of advisors who can actually execute these trades is limited to high net worth individuals OR institutional investors. Point being, your average Joe Bloggs investor is going to have one heck of a time getting any sort of ROI on his/her investment here, simply given the difficulty of selling the stock!

Conclusion:

Any type of VC investment is going to carry an inherently high risk. Hence the reason you have VC funds/firms that specialize in investments of this type, who hedge their risk across multiple investments and financial securities. The advent of the "average joe" vc angel investor is a new one and is regulated very loosely. Such investments are not required to be insured by the FDIC and offer little to no "protection" to the investor. Having spent eight years in the financial services industry (before calling it quits and becoming a firefighter lol) I have always advised friends and family to educate themselves on any and all investments they are considering entering into. The aforementioned investment is not one I would be interested in because it is high risk long term investment (I am short on almost ALL my underlying positions) and its inherent illiquidity. As mentioned before, these are my thoughts and opinions alone and offer them solely for the review of any interested parties.

 

Thanks Cordelayne, that was a very thorough review. I appreciate the lesson. Makes me feel like I'm ready to fail a grad school test again!

One other thing I'll point out now that you encouraged me to look at the Form C. It looks like every year they've gone back to the well for investment money and this was the first year they didn't break 2 million and instead only got $611,352.00. I say "only" as if that's bad. But it probably isn't good which is likely why they went to the public. Again, I have no problem with this, I think it's kid of cool. I wish them much luck and hope somehow years from now people that put in $20 are sitting on a gold mine. But I agree, there are probably better things to put your $20 into. Although, because you're getting game "perks" as well, this really isn't much different than supporting the game as a pledge. In that regard it's kind of a bonus! I guess it's all how you look at it.

Put a few bucks into a game and get digital perks, and oh yeah you own a very small percentage of the company to boot. Kind of makes me wish Portalarium did that, except then we'd be combing through their financial's and I'm not sure that would be any prettier to look at than Crowfall's are.

It's fascinating stuff though.

 

Like I said on page one... I think anyone buying (any significant amount of) stock in something like Crowfall or any niche video game ought to have their head examined, honestly.

 

Lol, it wasn't intended to come across like a lecture brother, I apologize if it did.

I enjoy dusting off the old MBA and delving into stuff like this from time to time. Reminds me of my previous life, prior to enlightenment.

You raise a very valid point and @Blake Blackstone mentioned it in an earlier post. They are churning through their "earned capital" at a rate that is unsustainable and each round of financing further dilutes the value of the underlying stock. The main problem I have with this is that they are representing a potential ROI to investors that in reality has a very low probability of actually coming to fruition (probably 5%). Caveat Emptor and all that, but this is something that is rampant throughout the financial services industry and the main reason for me giving into my Peter Pan syndrome and becoming a firefighter. Wall Street et al relies on the ignorance of novice investors in an exploitive manner that borders on the predatory and it incenses me beyond belief!

To their credit, they outline and explain every single possibility and nuance that could lead to the investment failing. But they have to do this under the Dodd-Frank Wall Street and Reform Act. Don't forget, you only own a percentage if the venture is successful, otherwise 1% of nothing is still nothing. A better return for your money would be selling covered calls of dividend bearing stocks. High liquidity, low/moderate risk and a much greater percentage to make a return (60-70% on average.) Okay i'm done, off my soapbox!

 

Sorry, I was being very sincere I learned a few things and I appreciated the lesson. I was just making making a joke about my past experiences.

 

If you like those, you should have a peak at the Fig.co forms. They used to have the full set of investor documents online, but now the keep them behind an investor portal. They have multiple layers of shell companies between the stock and the actual assets of the company, rewards that shrink the better the game does, buyback options that allow them to buyback all rights for a pittance if they choose to withhold sales, it is a sight to see.

 

Sounds like someone has seen the game up close and personal. The method above is one of only a few(maybe two) strategies to make a bit of money on your investment in the market. People don't realize that if you aren't on the floor you are considered to be the sucker.

The pitch they put together for the Crowfall investment looks like a turd wrapped in linen. A lot of fluff but nothing that says this could be even be a long shot investment. It would seriously be throwing money away.

 

Thats actually one of the games that Portalarium is recommending we support.

 

Well done, dear Sir. I salut you.
Even if i wouldn't be too lazy to sum it up like that i wouldn't be able to do it that good!

No.
You only have to know what you get into.
If you struggle to understand Codys explanation or if you read the documents by yourself and struggle to understand them then you don't know what you get into and should by all means stay away from this investment.
But if everybody would have your mindset we wouldn't have a lot of games at all.
Because they ALL had venture capital investors at some point of their history.

 

Fine line distinction, in a venture capital investment, the investor has a chance of seeing a return. Consider the scenario here, you have a company with no revenue stream trying to sell equity to secure a revenue stream, which they will then have to pay to the investors preventing them from supporting that revenue stream. It's like a man selling his cow to buy a new milking stool.

 

Yes, and venture capitalists, who have set themselves up with a lot of money and an attitude that some bets will pay off and some won't, are very different to the kind of people I'm talking about.

The kind of people I'm talking about, and which that deal of Crowfall's is trying to appeal to, are people who likely haven't experienced any sort of VC before and are basically fools for the taking.

 

Hehe I know what you wanted to say.
Non the less even between them you will find people that are absolutely aware of what they are doing ;-)
We will see how it will turn out.
This kind of crowd financing is still rather new. We will see how it will turn out.
For the moment there is zero difference to a normal KS.
The goodies are different, sure. But that's about it.
So I guess every KS backer needs his head examined too.

 

Would need to see a prospectus as well as a ton of other info, full financials included, included in the history and business plan for this (or any) company before even CONSIDERING investing at this stage in its sole project.

 

Cody did a fine example with the biotech companies.
Small biotech companies gather investors, try to develop that one medicament and if they are successful everybody wins.
If not, everything will go down the kitchen sink.
Now here is the thing: investing into biotech start ups is really cheap. So one can invest into many of them and if just one of them actually is successful you get a return that covers you other losses and adds for a nice +
That's not possible here. Games aren't just successful or not. There are a lot of shades in between. And most of them take care that I won't get my money.
But as I already said to Canterbury: so far no difference to a KS. If I loose my virtual goodies or my money...

 

Indeed, which is something I had already flagged earlier as an irony (ie: that it was basically the same thing). I think the point of difference, however, is that someone backing a KS isn't expecting/hoping for a cash return on investment.

 

Not really, a company that fails to deliver a KS pledge is still on the hook, they can and have been sued. If a company simply has no revenue, then investors have no recourse, especially if the investment is tied to a specific revenue source as is the case in fig.co investments.

 

Let me tell you about All quite on the Martian front, a KS i backed.
I got parts of my shipment and the next thing i recived was an US letter of insolvency from a court.
I knew the risks so i won't complain.
No hook left to hang them on.