Team Compensation Issue - What would you do?

[MJ1]

Suppose a solo counter has 2 investors that each put up 10k in capital to start a new bank. The agreement is to play until a target of 20k is reached or 6 months have expired, whichever comes first. Moreover, once the bank is broken, after expenses are deducted the player gets 50% and the investors get 50% in direct proportion to how much they invest.

Now suppose the bank is ahead 10k after 3 months of play and another investor comes along and says that he would like to invest 5k. Assuming the target still remains at 20k, do you think this is fair to the current investors? The bank is already half way to target, why should they have to take on the initial risk and then have their investor shares diluted by a third investor? Instead of receiving 50% each of the investment share, now they would only receive 40% each and the third investor would get 20%.

Would it be fair to push the target back from 20k to 25k and then allow the third investor to come on board mid bank?

What is the fair thing to do here?

Thanks,
MJ

 

[zengrifter]

Just pro-rate the new investor. zg

 

[bigplayer]

Suppose a solo counter has 2 investors that each put up 10k in capital to start a new bank. The agreement is to play until a target of 20k is reached or 6 months have expired, whichever comes first. Moreover, once the bank is broken, after expenses are deducted the player gets 50% and the investors get 50% in direct proportion to how much they invest.

Now suppose the bank is ahead 10k after 3 months of play and another investor comes along and says that he would like to invest 5k. Assuming the target still remains at 20k, do you think this is fair to the current investors? The bank is already half way to target, why should they have to take on the initial risk and then have their investor shares diluted by a third investor? Instead of receiving 50% each of the investment share, now they would only receive 40% each and the third investor would get 20%.

Would it be fair to push the target back from 20k to 25k and then allow the third investor to come on board mid bank?

What is the fair thing to do here?

Thanks,
MJ

The new investor would have to pay a premium for his shares. What you are doing is issuing new shares of stock in the team. The original investors individual $10,000 investment is now worth $12,500 each (total of $25,000 investor value). So if they originally had 100 shares at $100 each, they still each have 100 share, but they are now worth $125. (remember the other $5000 of bank growth belongs to the players, not the investors). The new investor would have to pay $125 for his shares in the bank and thus would only have 40 shares. The team would now have 290 outstanding shares with the two original investors each having 125/290 = 43.1% and the new investor having 40/290 or 13.8% of shares. When the bank gets broken these percentages would be applied to figure out what the investors have coming to them. If the bank is still broken at $20,000 then the original investors would get $4310 each and the new investor would get $1380 and the player would get $10,000.

 

[Sucker]

This is relatively simple, and the bookkeeping is really NOT a problem -

If the table limits are high enough that there's room for everyone:
The BR is now $30k. If the new investor puts up $5k, the BR will be $35k. The first two investors are investing 6/7 of each subsequent play and the new investor has an investment of 1/7.

Suppose on the first play at this arrangement, the team goes out & wins 7 thousand bucks. The first two guys get 6k and the other guy gets 1k. The BR is now $42k; the first two investors now have an equity of $36k, and the newcomer's share of the bankroll is now $6k.

In other words, if the bankroll increases by x%, each investors equity has to increase by exactly x% also.

If the table limits get in the way of optimal bet sizes:
Your original investors are getting screwed no matter HOW you do it. They decided to put up their money in good faith, and the agreement was - that you would manage their money in an optimal fashion. If they're not allowed to take FULL advantage of the highest counts, it's not at all fair to THEM, and therefore it's unethical of you to even SUGGEST that they accept anything less than the original agreement.

 

[MJ1]

Good stuff....

The new investor would have to pay a premium for his shares. What you are doing is issuing new shares of stock in the team. The original investors individual $10,000 investment is now worth $12,500 each (total of $25,000 investor value). So if they originally had 100 shares at $100 each, they still each have 100 share, but they are now worth $125. (remember the other $5000 of bank growth belongs to the players, not the investors). The new investor would have to pay $125 for his shares in the bank and thus would only have 40 shares. The team would now have 290 outstanding shares with the two original investors each having 125/290 = 43.1% and the new investor having 40/290 or 13.8% of shares. When the bank gets broken these percentages would be applied to figure out what the investors have coming to them. If the bank is still broken at $20,000 then the original investors would get $4310 each and the new investor would get $1380 and the player would get $10,000.

That sounds like a way to go....but I am a bit confused regarding some of the figures you mentioned. Shouldn't there be 240 outstanding shares given that there were initially 200 shares and then the 3rd investor bought an additional 40 shares? Also, wouldn't the initial 2 investors now have 100/240 = 41.6% of shares and the 3rd investor 40/240 = 16.7%?

The problem it seems is that the original investors are still getting their shares diluted and therefore experience a lower return due to the third investor.

MJ

 

[shadroch]

Why not break the bank now, letting the original investors take their profits and start a new one with a 40-40-20 split for the investors.

 

[forwhat77]

Why not break the bank now, letting the original investors take their profits and start a new one with a 40-40-20 split for the investors.

Kind of what I was thinking,,,or letting the third investor wait another three months...

 

[NightStalker]

What's the big deal?

Suppose a solo counter has 2 investors that each put up 10k in capital to start a new bank. The agreement is to play until a target of 20k is reached or 6 months have expired, whichever comes first. Moreover, once the bank is broken, after expenses are deducted the player gets 50% and the investors get 50% in direct proportion to how much they invest.

Now suppose the bank is ahead 10k after 3 months of play and another investor comes along and says that he would like to invest 5k. Assuming the target still remains at 20k, do you think this is fair to the current investors? The bank is already half way to target, why should they have to take on the initial risk and then have their investor shares diluted by a third investor? Instead of receiving 50% each of the investment share, now they would only receive 40% each and the third investor would get 20%.

Would it be fair to push the target back from 20k to 25k and then allow the third investor to come on board mid bank?
Thanks,
MJ

I've several investors jumping in and out, how does it matter?

Third investor investing 5k into 30k bank. Two solutions, new investors are::

1) 5k,15k,15k =investors-A,B,C
2) 5k,12.5k,12.5k,5k(player)= investor..
What is the fair thing to do here?

Both are same for new investor, (1) is a fair deal while (2) is more favorable for player =which is pre-termination of contract..