Article
I don’t necessarily want to answer the challenges, but I feel compelled to provide transparent information and explanations to current & future shareholders of Wallachia Corporation.
Lately, you have witnessed a fascinating strategic confrontation between two diametrically opposed economic visions. While Wallachia Corporation (n.r. – the majority subscribed shareholder) has distributed over 4,000 Gold to shareholders in the form of dividends, the competition from Berkshire Hathaway Corporation timidly promises that a distribution will begin only in a few months or even a year.
Sources within the competing corporation have launched a speculative thesis: the substantial dividends offered by our corporation were financed exclusively by donations made by me. This statement belies the deep knowledge of the stock market mechanisms in e‑Sim and confuses modern financial engineering with simple capital injections.
We will therefore proceed to a brief academic dissection of the two business models, in order to establish once and for all who truly understands the levers of shareholder value.
1. Issuing shares vs. Selling personal holdings
The fundamental difference between our strategy and that of our competitors lies in the understanding of capitalization.
Corporation Berkshire Hathaway resorted to selling shares from its personal portfolio. From an accounting point of view, this operation represents a divestment. The shareholder reduced his exposure, turned paper into gold, and the income went into his personal account, not the company's. The company's assets remained unchanged. The shareholder structure changed, but the financial strength of the corporation, zero.
Corporation Wallachia resorted to increasing the share capital by issuing new shares. The 2,000+ shares issued at a premium price generated a massive influx of liquidity directly into the company's account. This is called capitalization through share premium. The company's assets grew instantly. We did not receive money from the shareholder; we created our own financial strength.
“A long time ago, Ben Graham taught me that price is what you pay, value is what you get.”
— Warren Buffett
They offered shares at a discount. They reduced their personal holdings, they received money in their account. But what value did their company receive? Zero.
We issued shares at a premium. Investors paid more, but the value they received capitalized, liquid company, capable of paying dividends IMMEDIATELY—was infinitely greater.
So, while they monetized their personal stake, we monetized the potential of the company.
The difference between taking money out of personal papers and putting money into the company you run is, unfortunately, one of the missed lessons in Corporate Finance 101.
2. Market value and financing power
Another argument from competitors concerns the issue price, which is considered “overvalued.” Confusing the face value with the financing value is a textbook error.
The price of an issued share should not only reflect the net book value, but also the manager's ability to multiply that capital. Smart investors do not buy current assets, they buy vision and future returns. The fact that we were able to place +2,000 shares at a premium demonstrates the market's confidence in management, not a "deception".
"It is much better to buy an extraordinary company at a fair price, than a fair company at an extraordinary price."
— Warren Buffett
This issue gave us financial sovereignty. We had the resources to pay record dividends. They do not have this resource because, by selling personal shares, they deprived the company of oxygen. Now they wait 4-10 months to slowly collect operating profit, while we accelerated the future.
3. Dividends: Purpose vs. Tool
The competition considers dividends a "fad" or a "delusion". For them, dividends are a terminus, a final effort. For an experienced CEO, dividends are an Investor Relations tool.
The 4,000 Gold distributed was not an expense, but an investment in corporate branding. What is the value of a share of a company that, months later, “promises” to deliver something? In contrast, a company that gives money today creates a shield of loyalty. Our shareholders will not sell in times of crisis. Their shareholders are speculators, because they have never been given a real reason to be anything else.
“You only find out who swims without clothes when the tide passes.”
— Warren Buffett
We have already passed the tide - we gave dividends.
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C O N C L U S I O N
We are sorry to have to give such a lesson in Corporate Finance 101 (What we are discussing here is so elementary that it is taught in the first week of the first year of college. It is the ABC of the field.), but the accusations of “disguised donations” cannot go unanswered. The objective economic reality is as follows:
They reduced their personal participation – they sold shares from their own portfolio, transforming financial assets into personal liquidity. However, their company did not capitalize with a single Gold.
We increased the share capital – we issued new shares, at a premium price, and the entire financial influx entered the company’s treasury. Our company became capitalized and became liquid instantly.
Claiming that we “donated” our own money to pay dividends is like saying that a chef buys his own food from his own restaurant to make the place look busy. It makes no sense, because the cash flow generated by the share issue perfectly explains the necessary liquidity.
We remain anchored in the reality of numbers and accounting, not speculation and misperceptions.
Good luck with the dividend plan in 4-8 months. We will follow your progress with interest.
Until then, Wallachia has shareholders who have already received real dividends. Berkshire Hathaway shareholders only have promises. 😉
In advanced economics, my teacher told us something that I wrote down and still remember:
Mathematics is the tool, not the answer. A good engineer knows how to calculate. A visionary knows WHAT to calculate.
And since I've been hinted at as cheating and artificially supporting the corporation, here's a quote from "The Godfather":
"Don't try to count the money. You can see it, feel it, smell it. If you count it, it means you don't have enough." — Mario Puzo, The Godfather (Don Corleone)
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With respect,
Briggs - CEO Wallachia (ex-BATRANUL99)
PS: In real life I am a Certified Public Accountant, which means I have the right to keep accounting records for multinationals of any type. I tried not to use too many words from my profession, I used only the ABC of economics, the simplest names and explanations.
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Dividends of +2000 Gold!!! (2 months ago)
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Wallachia – Facts, not Promises (2 months ago)
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USA as a world power? In E-Sim it is possible!
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