Back in November, I wrote about the money supply in Second Life financial markets. During the month of November, approximately L$ 50,000 of new money came into the Virtual Stock Exchange (VSTEX) each day. How much of that was driven by VSTEX and how much was driven by the CEOs of individual companies is hard to say. However, it provides a good baseline for where things stand.

Currently, there are seven companies in IPO on the VSTEX. The offerings are set to expire on the fifteenth, and it looks like many of them may not reach the 50% required subscription rate. VSTEX is having a meeting this evening for the CEOs of the IPOs, so this might be a good time to look at the companies and think about what should happen.

The ITLAND Italian Beach Jazz Club (ITL), is attempting to raise L$ 2,000,000 via an IPO. 22% of the shares have been purchased. If all of the L$ 50,000 coming into VSTEX went to ITL, it take them 40 days to sell all the shares, so this seems like an ambitious IPO. They have an impressive list of real advertisers. However, their business plans starts off, “The general evaluation of Italian Beach Jazz Club is estimated for 20.000.000 L$” It doesn’t say how that general evaluation has been arrived at. However, they report current earnings of L$ .011 per share which lends some credibility to the valuation. Is their IPO just too big? Is it that they have done little to promote the IPO? They only have one news item. Is it that by holding on to 90% of the company, they have discouraged investors? It is hard to say, but with over half a million Linden yet to be raised, they are probably going to need some sort of restructuring.

Bedlam Business Network (BBN) is attempting to raise L$ 900,000 via their IPO. Less than 4% of the shares have been purchased. Early on, there had been concern about what percentage of their earnings they would pay out as dividends and when they would start paying dividends. Unlike ITL, they don’t have an earnings history to go back on, and they don’t show an immediate profit. Right now, investors in Second Life companies are looking for immediate profits and BBN just does not seem to be compelling. They appear to have a bigger battle than ITL does.

Second Life Creations (SLC) is a special case. This is a secondary offering as Ronisu Rotaru attempts to turn around the company. They are attempting to raise L$ 300,000.

Archon Traders Group (ATG) is attempting to raise L$ 1,000,000. They have sold just over 5% of their shares. They expect to pay dividends between .02 and .04 per share, yet share prices are targeted at L$ 2/share. Even so, that is respectable dividends. They have cash on hand and land, so they look a little more compelling. The problem is that they are competing against BBN, CIE and BNF. On top of this, most people investing in the Second Life markets seem to enjoy picking stocks themselves, so all of the companies are likely to have difficulty raising capital.

Bikini Management Group (BMG) is different from that group. They run a mall, have a Jazz Club and have a full service wedding sim. My wife and I got married in LambdaMOO, a text based virtual world, several years ago. BMG looks compelling. However, they aren’t expected to turn a profit until next month and they seem to have done no marketing of their IPO. They are only attempting to raise L$ 540,000 and the CEO is only holding on to 56% of the company, with another 20% held in options. Even with that, they’ve sold less than 5% of their shares.

Cobalt Investment Enterprises (CIE) is another one of the investment companies attempting to bring an IPO. They are attempting to raise L$ 1,125,000. They are a bit like ATG with cash on hand and land. They have issued press releases and they have priced their stock at L$ .30/share, unlike the typical L$ 1/share. They’ve managed to sell about 12% of their shares.

Begneski Investment Firm (BNF), from what I have seen, has been the most aggressive in marketing their fund. They’ve issued press releases. They’ve set up a blog, which only has one entry. And Scottybig Oh has been out talking up his fund frequently. It has paid off, with over 42% of the shares sold. Granted, they set their sights low, only trying to raise L$ 400,000, but they should easily reach the 50% level before the fifteen.

Over on the International Stock Exchange, (ISE), Vlada Fine Furniture & Fixtures (VLADA) is offering an IPO. There doesn’t seem to be as much information available, but they are trying to raise L$ 700,000. It isn’t clear how much the CEO will hold, or if those holdings come out of the L$ 700,000. Currently, there are 166,000 shares available. However, looking at the history of share purchases, something that ISE does a good job of providing, only 184,000 shares have been purchased since 10/30. The 166,000 shares outstanding and the 184,000 shares purchased add up to 350,000 shares or half of the outstanding shares, so perhaps, the other 350,000 will be held by the CEO. It is not clear how long the IPO process will take.

On the ANCAPEX, ACE: Ancapistan Capital Exchange is attempting to raise L$ 7,700,000. So far, they are about 10% of the way there. Their IPO was started on 10/25, and there isn’t a known time limit on the IPO.

BAM: BCX Acquisitions and Mergers is trying to raise L$ 5,000,000. They just started their IPO and have yet to raise 1% of their amount. It is too early to comment. The same applies to FWD: FREEworld, which is trying to raise L$ 800,000 and OIG: OnLine Investment Group, which is trying to raise L$ 7,000,000

The one interesting exception in IPO at ACE is WJUV: WJUV Radio. This is an established business, trying to raise L$ 800,000. Monkey Canning and AVC is behind the venture and they apparently had pent up demand before they launched their IPO.

What are the lessons to be learned here? Perhaps the same lessons that people trying to raise funding for companies in real life already know. You need a viable business plan and the ability to get people to pay attention. You need to set realistic expectations about what you can raise.

A second idea that comes to me after I review this is that a better mechanism for creating investment companies in Second Life needs to be created. Companies like BBN, ATG, CIE and BNF are similar to closed ended funds in the real world. Perhaps instead of requiring them to raise at least 50% of their initial IPO, exchanges like VSTEX should set a timeframe for the public offering and a range of acceptable shares to be sold. How many shares do these funds need to raise to be viable?

Another interesting issue is to look at the interrelatedness of the offerings. BNF has bought shares in CIE and BBN. BBN has bought shares in BND and CIE, and CIE has substantial holdings in AVC, DFC and VST. What happens to various stock prices if some of these positions get unwound?