What does a "good" company shares system look like?

[pickpacket]

Buying and selling company shares has been removed. There is a thread (at least one) where we discuss what we think of that decision. This thread is not about that.

The setting for this discussion is this:
It's 2023. OpenTTD has never had a way to buy or sell parts or whole companies. Someone somewhere said "this is a capitalism simulator about running a company and beating your competitor. Wouldn't it be cool if there was some sort of stock market, or stocks in the player companies? I don't know how it would work but I feel like maybe we could do something fun in that direction. What do you think?"

This is an invitation to discuss how a good company share system would work. Start from a clean slate. There is none now, and humour me in pretending there never has been. Does the idea tickle your grey cells? Do you have any suggestions of what it could look like?

[odisseus]

To begin with, I think share trading is a redundant feature; it's not really tied to the rest of the game, and developing a full-blown simulation of the financial market would rather be out of scope. What we actually need is just the ability to take over other companies — but since we allow the player to buy a company in its entirety, why not allow buying just part of it? So, here it goes:

1. Any company may buy another company's shares, but once bought, the shares can be sold only back to their issuing company. This limitation is of course unrealistic, but it allows us to simplify the trading greatly. There would be no need to implement competitive bidding, stock exchange etc.
2. The cost of shares should be proportional to the current company value. To buy 100% of shares, one must pay exactly as much as the company is worth, which would result in the takeover of the company.
3. We may need to rethink the way company value is calculated. For one, it should take into account the expected profits for the next few years.
4. Ownership of shares should bring dividends. These should be taken once a year from the company's net profits for that period. Each shareholder should receive a fraction of the profit proportional to his share ownership; in the limit, 100% ownership would have brought 100% of the profit.
5. When shares are being traded, the money goes from the buyer's account to the seller's account. This has two consequences:
   1. A company might be unable to buy back its shares due to having insufficient funds at the moment.
   2. When you buy 100% of the company at once, you immediately get your money back, plus all the assets of said company. This necessitates the following condition:
6. The company manager (at least one in case of co-operating players) must consent to the selling of shares. The shares may be bought without consent for an AI company, or if the company is in financial trouble. Similarly, when the company buys back its shares, both parties must consent.
7. There should be some mechanism to prevent stock fraud or at least make it too cumbersome. For example, it should be forbidden to give money to a company whose shares you own, or to a company which owns your shares.

[kamnet]

1. Any company may buy another company's shares, but once bought, the shares can be sold only back to their issuing company. This limitation is of course unrealistic, but it allows us to simplify the trading greatly. There would be no need to implement competitive bidding, stock exchange etc.

I don't think it would be much more difficult to implement an option to trade shares between players, but it might mean a few more buttons in the interfaces.

2. The cost of shares should be proportional to the current company value. To buy 100% of shares, one must pay exactly as much as the company is worth, which would result in the takeover of the company.

Given that the "Hostile Takeover" feature is coming, I don't think that should work like that here. The owner of the company needs to continue to hold the majority of shares, the shares that are available to buy are only a portion of that ownership, say, no more than 49%. If you want to try to buy the company out, that triggers a hostile takeover. requires more than the current value of the company to perform.

3. We may need to rethink the way company value is calculated. For one, it should take into account the expected profits for the next few years.

Seems reasonable.

4. Ownership of shares should bring dividends. These should be taken once a year from the company's net profits for that period. Each shareholder should receive a fraction of the profit proportional to his share ownership; in the limit, 100% ownership would have brought 100% of the profit.

If you own 100% of the company, then it's just your company, there's no dividend to be rendered. You buy out the other company, the other player you bought out is out of the game.

In the real world such dividends will vary from company to company based on whatever the company structures it as. That's likely too much management in OpenTTD, you could have a game setting that sets the rate globally that's adjustable by the server. And if a server owner wants to set it to something insane like 90-100%, that would probably discourage anybody from ever wanting to participate, but I think the server owner should set it to whatever they want for whatever reason.

Now, here's something that I don't think you could avoid... in order to stop paying out dividends, a company would have to have no profit at all. So on December 31st they could buy up a million trains in order to tank the profit to $0, then after the dividends for the year are paid out (or not in this case), sell off those trains and get almost all of their money back since the trains are practically brand new. That's a fun strategy, but you risk upsetting any players who own shares and catch on to it... thus potentially leading to a hostile takeover.

5. When shares are being traded, the money goes from the buyer's account to the seller's account. This has two consequences:
a. A company might be unable to buy back its shares due to having insufficient funds at the moment.

If we don't have trading of shares between players, this is reasonable. And this can be strategic, because if a company has to buy back its shares, it will immediately tank profits, and a company should not be able to refuse buying back shares.

b. When you buy 100% of the company at once, you immediately get your money back, plus all the assets of said company.

No, when you buy 100% of the company, what you paid out for it is gone. What you get for it in return is all of it's current cash on hand, all of its debts, and all of its assets (vehicles, infrastructure, cargo allocated to it).

I'd throw in two other things we could do here:
1. Instead of the money being gone, the player who is bought out receives it all and gets the opportunity to start a new company with that cash on-hand instead of a loan. If player is leaving the game, then the money evaporates.

2. When you buy out a company, you have an option to liquidate all of the assets and take the cash. This would remove all of their vehicles, infrastructure and cargo from the map.

This necessitates the following condition:

A. The company manager (at least one in case of co-operating players) must consent to the selling of shares. The shares may be bought without consent for an AI company, or if the company is in financial trouble. Similarly, when the company buys back its shares, both parties must consent.

I agree that a player must opt-in to start selling shares of their company, but once they do they cannot refuse any buy backs. A player can also offer to buy back shares from another who owns them, but the offer can be refused. Once the player buys back those shares, those share are taken off of the market, and the player can decide if they want to issue them again.

AI companies automatically offer shares once they reach a certain value (set by server). The AI can be written to buy back shares on its own. Once AI buys back a share must offer them for sale again at the new valuation. If an AI is forced out by hostile takeover, it can be written to either terminate or start a new company with cash on-hand.

B. There should be some mechanism to prevent stock fraud or at least make it too cumbersome. For example, it should be forbidden to give money to a company whose shares you own, or to a company which owns your shares.

I don't think it should be forbidden, I just don't think that this would be a thing. If you have shares enabled in a game then players are competing against each other, they're not going to give each other money willy-nilly, and if the do, so what? The ability to give money to each other is really more for cooperative games where players are working together, so stock trading probably isn't going to be enabled at all.

[Eddi]

i always found the stock market features to be the most out of place ones in "tycoon" games. stock markets are very complex, and difficult to simulate, whereas the features that were implemented were always very oversimplified.

personally, i think a stock market feature can never work right, because after a while you get virtulally infinite money, and the stock market must be balanced against that, wich is obviously impossible.

anyway, here are the main features i think a stock market should have:

1. there are two types of stocks. one which demands a dividend, and one which gives influence over the decisionmaking of the company. the first kind works somewhat like a bank loan, but cannot be used to take over a company.
2. the stock market should feel like there are more people involved than just the players.
3. share price doesn't solely depend on the assets of a company. things like overall economic outlook, mood of a manager or simply trying to buy a larger amount of stocks can massively influence share prices.
4. trying to buy more shares than are available can put the player in serious financial trouble, as he must meet his orders at highly inflated prices
5. a player must actively issue shares in his own company, and only gets money at the moment when doing so. what happens in the stock marked stays in the stock market.
6. to prevent (the most obvious cases of) "fraud", buying stocks comes with a minimum holding time.

[Pyoro]

i always found the stock market features to be the most out of place ones in "tycoon" games. stock markets are very complex, and difficult to simulate, whereas the features that were implemented were always very oversimplified.

You can say the exact same thing about literally anything else in the game, so why should stock markets be an exception?

personally, i think a stock market feature can never work right, because after a while you get virtulally infinite money, and the stock market must be balanced against that, wich is obviously impossible.

We agree on that though. OTTD economics is fundamentally a non-issue, but stock markets are all about money making. So personally, as with everything else, all I care about is that I can "roleplay" what I want. Company A owns bits of Company B. Does it pay dividends? Does the cost make sense? Does it give anything? ... I really don't care ^^;

[kamnet]

Honestly I don't see it as about making money. Making money has never been the point of the game, money is just the tool available to accomplish all other goals. So the question to ask isn't if we need another way to make money, we should be asking what value does a stock shares system brings to the game.

And to me the answer is obvious - to make problems for other companies so that yours perform better than theirs. Which is what all good tycoons do.

[jfs]

One question definitely needs an answer:
Who owns the shares of a company initially?
There are two main options, either the company is its own sole proprietor, or the shares are all owned by a "general public".

The latter is how it works in Railroad Tycoon. When your company is founded in RRT it happens by issuing public stock to investors, and your initial funds are not a loan but the sale price of that initial stock offering. During the game, you can then buy back stock from the public (treasury stock), or you can take investment offers from cities where new stock is issued to the general public. This means that the number of shares in a company varies throughout the game. If the share price of your stock increases sufficiently, the stock will also be split to lower the individual share price.

I don't think having the company be sole proprietor initially works well as an idea. Why would you ever sell your own stock then? If you're doing well you don't need to. If you're doing poorly then investors probably wouldn't want to buy your stock.

There is also the possibility of the Railroad Tycoon 2 model, where the player character is distinct from the company the player operates. The player character can own stock in multiple companies and increase their personal wealth from dividends and speculation. If you're doing poorly as operator of a railroad company, you can be fired from your position as director by the board of owners, unless you happen to personally own a majority of the stock in which case you're immune. Alternatively, you could even play the game without operating a railroad company at all...
That model is probably too far to go for OpenTTD.


Either way, in my opinion the correct model is:

When a company is founded, its initial cash base is a blend of public investment and a bank loan.
The stock is wholly owned by the public, until one or more of the companies in the game buy shares from the public.
The player company can also buy back its own shares from the public.
If you own 50% of the shares in a company you can not buy more shares in that company, unless you buy the entire remaining stock as a hostile takeover.
A hostile takeover has a higher share price than regular trading.
Game Scripts can create more stock in companies, to offer gameplay where the public invests in a company to create new services but the company might also take on specific goals to achieve with that investment. (For example, instead of getting a subsidy in a town, the town might offer to invest in the company to build a specific route. The player accepts the investment, and a while later the GS begins checking if the company has actually achieved the goal. If not, the company might get a penalty for breach of contract.)
Share price is based on company performance in some way: A combination of current assets, fixed assets, and expected income.
Company value is number of shares multiplied by the share price.
The company pays dividends to shareholders (including general public) at year end based on the operating profits.

And yes, all of this adds a huge metagame that isn't about transport at all, and I don't really think it has a place in the base game at all. It's a transportation game, not a stock market game.
"Either do it right, or don't do it at all."

[pickpacket]

There should be some mechanism to prevent stock fraud or at least make it too cumbersome. For example, it should be forbidden to give money to a company whose shares you own, or to a company which owns your shares.

I don't think there's an effective way of preventing fraud if you can gift money to any other company and that affects stock value. In a multiplayer game I could just create three companies. Company A buys shares of B, C gives money to B, A sells the shares back, B gives the money back to C. Rinse and repeat. It could be prevented if share buying and money gifting are mutually exclusive.

That also means that selling shares is a way of getting money.

Given that the "Hostile Takeover" feature is coming, I don't think that should work like that here. The owner of the company needs to continue to hold the majority of shares, the shares that are available to buy are only a portion of that ownership, say, no more than 49%. If you want to try to buy the company out, that triggers a hostile takeover. requires more than the current value of the company to perform.

That feature is only for buying out AI companies.

personally, i think a stock market feature can never work right, because after a while you get virtulally infinite money, and the stock market must be balanced against that, wich is obviously impossible.

I was thinking about this too. If a company is doing poorly there's no incentive to buy its stocks. If it's doing well then the stock value will only ever go up, and if the company that bought them is doing well it already has more money than it can spend either way.

Honestly I don't see it as about making money. Making money has never been the point of the game, money is just the tool available to accomplish all other goals. So the question to ask isn't if we need another way to make money, we should be asking what value does a stock shares system brings to the game.

And to me the answer is obvious - to make problems for other companies so that yours perform better than theirs. Which is what all good tycoons do.

Haha! Then how could we design a system like this in a way that makes sense and is also a weapon?

[ahyangyi]

In the board game scene, there are many railway building games. A major genre also has stock trading -- it includes the venerable 18xx games, but also lighter takes such as Chicago Express. The other games, such as Railways of the World, do not feature stock trading.

And what's the major difference between the two types of games? In games with stock trading, the players never play as one company. They play as investors that could manage multiple companies simultaneously, or hold the cash and controlling no companies at all. And in games where the player controls exactly one company, there is no stock trading -- at least among the more successful specimens.

I think it is a lesson to learn about. With company shares, hostilities over buying and dumping shares must be part of the core game, and the whole game needs to wrap around that feature, to the extent that you probably have to abandon the premise "you are the president of a transport company".

[kamnet]

That feature [hostile takeover] is only for buying out AI companies.

As of now, yes. It should be able to be modified for all players, since IIRC there is little difference between human players and AIs.

Haha! Then how could we design a system like this in a way that makes sense and is also a weapon?

Perhaps I should make my own post that more clearly lays out my own ideas.

For the player offering shares of their company, it is an alternative to taking loans as a means to raise short-term capital. With loans you are paying a percentage of your income every year, and if you don't make a profit then it accrues as an ever-growing debt on your ledger. With shares your company only pays out a dividend at the end of the year if there is a profit. This is the risk that other players take when they buy shares. But the more shares any one player has, the greater the risk that the player will move to take over your company and force you out of the game. You must improve your company's finances in order to make a hostile takeover too expensive of a proposition or to stave off bankruptcy. Once you buy back shares you have to decide if you're going to keep them (and pay a premium for doing so) or reissue them. And if a player wants to sell their shares back to you, you cannot refuse, and this will hit your bottom line in the short term but will give you back more control of your company.

For the player buying shares of companies, there are two strategies that can be pursued. The first is that you need a more reliable source of income and tapping into another company's profits will hopefully be better than taking a loan. The reward should be greater than the risk if the other company does its job, and although you will pay a tax when you sell your shares back, the profit should more than offset what you've spent. The second is that in pursuing the goal of being the best performing company yourself that you need to remove or devalue your opponents. Buying up portions of their stock means that they have to pay out their profits and therefore will have less money to work with to pursue their own goals. And if you buy them out in a hostile takeover, you will either gain all of their assets and expand your empire, or you will liquidate them and rob them of all their cash. Opposing players will get to start over with a new company, but will now be behind the rest and will have to play harder or smarter to get back to the top of the charts.

[2TallTyler]

[The hostile takeover feature] should be able to be modified for all players, since IIRC there is little difference between human players and AIs.

Technically speaking, yes. But I suspect having your company bought out from under you would irritate almost any player.

There's been some discussion about network games remembering each client. If this were implemented, I'd be interested in seeing players get a personal bank account (like in RT3) which they use when starting their company. If they then gain an option to offer their company for buyout, they receive the sale proceeds to their personal bank account, which they can then use to start their next company. This would allow for some interesting gameplay like building a line intended for takeover from a larger company (as was common in the heyday of railroad construction in both the UK and US) or even "working for" a larger company.

Obviously, this bank balance would not carry over from game to game — it would only be for that one network game and be reset when the server restarts.

[kamnet]

[The hostile takeover feature] should be able to be modified for all players, since IIRC there is little difference between human players and AIs.

Technically speaking, yes. But I suspect having your company bought out from under you would irritate almost any player.

Oh, absolutely - just as having another company suddenly putting stations in the area you've worked and siphoning off cargo would be irritating. Or blocking your tracks/road, or gaining exclusive transport rights, etc.

But with what I've proposed, it doesn't leave the player who gets bought out with nothing. They get the option to start over fresh, without a loan and whatever money it cost to be bought out, which will likely be a decent chunk of money.

[Eddi]

how about this: other than player companies, the stock market also (or only) allows investing in non-railroad companies. there are lots of real companies that "divested", and there are plenty of corruption scandals with that.

for extra flavour, the companies could also be taken from the industry list. not suire if tieing the value to ingame production is a great idea though.

[peter1138]

Extend stock market to include industries. This could then bring some reality to currently silly "I own that industry, stop stealing from it!" rules... (this, of course, opens a can of worms about where cargo payments come from.)

Separate shares from companies, so that "non-company" entities that are also able to own shares in companies and industries, and manage their own worth. Perhaps they can invest in houses as well.

(Game Script, right?)

[jfs]

I think implementing proper company shares, stock market, industry ownership, and more related things, could make an interesting game (perhaps in the vein of the A-Train series) but I don't think it would fit in OpenTTD main. However forking the game, giving it a new name, and overhauling everything without trying too hard to keep things compatible, might make an interesting project and something I would probably play.

[LaChupacabra]

Wouldn't it be cool if there was some sort of stock market, or stocks in the player companies? I don't know how it would work but I feel like maybe we could do something fun in that direction. What do you think?"

Above all, Glad you opened this topic. I think it would be good if these more significant changes to the game started with such open discussions. This would avoid a lot of bad emotions and lack of mutual understanding between players and developers.

From a list of ideas for the game's economy

3. Company shares
The current model is so distorted that it can be called a joke at most. The player should decide whether he wants to sell his shares and not anyone else. Shares are sold to raise funds for the development of the company. If someone has shares, e.g. 25%, then they should also receive such a percentage of that company's profit. The new share model could largely be modeled on, I think simple and understandable for every rules of the well-known Dragons' Den television program. By selling 100% of shares it would also be possible to transfer the company to someone.

This is my opinion and roughly outlines the idea of shares. This is over 3 years old but still relevant.

In the aforementioned show, budding entrepreneurs present their ideas in front of a group of business sharks in order to obtain financial support in exchange for a share of profits. Some ideas are bad, some are good, some are really interesting. Participants value their companies very differently and expect different types of support. Sometimes they ask for £50,000 for 30% and it turns out to be a poor offer, and other times they ask for £500,000 for 1% and all the sharks are fighting for the opportunity to participate in this deal because they know it must work. Which investor the participant chooses depends not only on the financial proposals, but also on what kind of support he can count on. It could be similar in this game...

In online gaming, perhaps one of the most frequently asked questions is, "Can someone lend me some money?" I don't mind supporting players, I do it a lot myself, but... being a good uncle always is a bit boring. I'd rather that money could be my investment. "$1,000,000 in exchange for a 25% shares"? It can be an opportunity, but it can also be a flop. A minor* change to the existing system could add an interesting element of player interaction to the game. It is not only passive waiting for someone else's profits that comes into play here. Someone who owns XX% of shares will care about the development of this company...
*I don't know. I wish I was right, but that might be part of my wishful thinking.

No graphical presentations. For now, just a few general assumptions of this idea:

• The player is the owner of his company (it always has been and let it stay that way)
• Shares in the company are in the form of an agreement between the players

1. The player and only he can makes the decision to sell the shares
   If there are several players in the company, only one can make this decision
2. The main purpose of the sale of shares is to raise funds for the development of the company
3. A share sale can be used to transfer a business to someone
4. An offer to sell shares may be:
   - Open and addressed to all other companies, as well as the possibility of buying out a bankrupt company
   - Or directed by the player to a specific company
5. The player determines how many percent of shares he wants to sell and how much money he wants for it
   Alternatively, for simplicity, the game may value the sale of the shares based on the goodwill. This could happen only after at least 2-3 years, when it will be possible to reliably assess the potential profit and its growth. This can be a preliminary quote that the player can change at his discretion (better) or a final quote (worse).
6. A dedicated window would be created for the management of owned and sold shares, enabling:
   - Observation of the value of shares and received dividends
   - Offering to buy shares in your own company
7. By default, shares are sold for a certain period of time, after which the company owner can buy them back from the investor for their current value.
   The seller of the shares may change this default period. It can be unlimited, but it cannot be less than the minimum value.
   The minimum time should rather be adjustable or at least dependent on the pace of the game - with the valuation of the company's by its property, i.e. as it has been so far, it would be a protection against fraud.
   The holder of the shares can sell them back to the owner of the company for their current value before the expiry of a certain period of time.
8. For the effective elimination of fraud, but also for a more interesting game, the valuation of the company's value could optionally be based on projected profits.
   It can be a simple mechanism that takes into account the income from the last 2-3 years
   A more complex one would take into account a longer period, as well as the highest income in history, the prospect of income growth, the presence of a crisis, the increase in world production and possibly other factors.
   A more complex mechanism could be less understandable for players, but at the same time more resistant to manipulation
   Current property valuation should still be available as an option, just like the original vehicle acceleration model.
9. The player who sells 100% of his company's shares becomes the spectator who owns this money and will continue to own it after starting a new company (I don't think a new passwordless system is necessary here)
   Independent idea: Each player could start the game with a certain amount of own funds, which would be an alternative to credit and also partly to the option of cheating (you don't have to click the cheat option every time to start a sandbox game with unlimited funds)
10. Dividends are distributed monthly - higher frequency allows for smaller cash spikes and better game flow
11. The holder of:
    - XX% shares receives XX% of the profits of this company
    - 50% or more shares can enter the company of both AI and another player (two passwords would be valid for the current authorization method)
    - 75% or more shares takes full control of the AI company (AI goes sleep) and de facto takes over the company, but without merging it.
12. In the finance window, if the sale of shares was enabled, an additional section would appear with information about the income and costs of shares.
    There could also be a button to a window with detailed information and sell / buy options

[+] Spoiler

New finances window v4.1.png (133.5 KiB) Viewed 2464 times

The idea of creating a stock market is interesting (and this does not rule out the above idea either), but as already said, it would hardly fit into the basic version of this game. After all, even "simple" ideas are quite complex. The stock market is not simple even in its assumption. In addition, I think the stock market is a bit soulless. I'd rather trade with a live, unpredictable human than with limited algorithms.

[Eddi]

However forking the game [...]

that sounds like a terrible idea. besides that this already exists in the form of "patch packs" which are a major pain to keep compatible.

however, i think a stock market feature is pretty orthogonal to all the other game features, so it should be easily added to the game without sacrificing anything, so it doesn't really warrant forking anything.

[jfs]

that sounds like a terrible idea. besides that this already exists in the form of "patch packs" which are a major pain to keep compatible.

however, i think a stock market feature is pretty orthogonal to all the other game features, so it should be easily added to the game without sacrificing anything, so it doesn't really warrant forking anything.

My thought was that if you add elements of industry ownership then you almost certainly also need to add an element of cargo ownership (i.e. you don't transport on contract, you buy and sell commodities), and that's a fundamental transformation of the game that I doubt can be made optional in a reasonable way. That's why my suggestion would be to make a new, different game, using OpenTTD as a game engine, if you want those specific features of economy simulation.

[pickpacket]

@LaChupacabra

I'm definitely not an expert at the code base, but I believe this would be a very difficult thing to do. A major hurdle to pass initially is decoupling player from company and making a player an active agent of the game. As it is today the core design of the game is that a company is the one doing things and players ("clients") are just controllers of said company's actions. Lots of interesting ideas in your post though.

[pickpacket]

personally, i think a stock market feature can never work right, because after a while you get virtually infinite money, and the stock market must be balanced against that, which is obviously impossible.

I was thinking about this too. If a company is doing poorly there's no incentive to buy its stocks. If it's doing well then the stock value will only ever go up, and if the company that bought them is doing well it already has more money than it can spend either way.

I'd like to return to this because my mind keeps circling back to these thoughts. Maybe we need to formulate an explicit purpose for a (limited) stock market feature in the game. What value could it add? How could it add it?

When a company goes bankrupt I believe that at least one competitor is offered to buy it before it goes under (citation needed; I don't remember clearly and can't find anything about it on the wiki). Has anyone ever actually bought a company that's about to go bankrupt?

Gifting money is similar to what buying shares in a company could be. Today a player may plead for a gift when things are going badly, and someone may (as LaChupacabra put it) be a good uncle and give them some. If the alternative was to invest in the company via buying shares, would that really be different? Is a company going into hardships ever likely to turn things around to a degree where owning shares in it will be profitable? Because otherwise buying shares in it will only be marginally different than gifting money. Maybe being able to give them a loan and being paid interest (same as the interest on a bank loan) would be equally worth it?