Following feedback from the community, i decided to submit this IPO application.

While, neither an introduction of me, nor of the idea behind this IPO should be necessary, feel free to ask questions here and i'll just jump straight down to business:

First, like in any architecture, let's start off with the foundation, the pre-IPO balance-sheet:

ASSETS:
Cash: 0.00
Stocks: 40304.59

These 40k L$ worth of stocks are:

FED: 8816 (based on avg price of 1.75)
CR: 10729 (based on avg price of 1.02)
SAS: 6207 (based on avg price of 1.70)
SLG: 3799 (based on avg price of 0.89)

In the IPO the aim is to raise 60k L$, so the total networth is ~100k L$. Yes that's extremely small market cap, but that's also the point.

Shareprice is set to 0.50, i find precisely this value most perfect, because: at ISE minimum price change is constant at 0.01 L$ (regardless of price), and because the minimum price change excedes transaction fee at the level of 0.50, this helps to counter bidriggers. After the IPO is completed the balance-sheet would look something like this:

Cash: 59400.00
Stocks: 40304.59
Total Assets:  99704.59

Shares outstanding: 200609 where 80609 shares represent my asset contribution, and the remaining 60% represent the cash contribution from public investors. 

With this basic foundation, and very limited capital we can now take a look at the allocations, i spent some time trying to figure this one out, heres the result: There are basically 2 rules for allocation:

1. At all times at least 30% of assets shall be kept available in cash.
2. Investments shall be diversified in a way that does not jump too far away from the "desired portfolio structure" (see below).
(on special occations, if the right opportunity exists, it may be desirable to temporary go beyond those 2 limits, but only over a limited time-period)

That, i believe should define the foundation and some basic structural oversight, now over to that "desired portfolio". It is always controversial, and upto lengthy discussion what is and what isn't a well received, generally accepted portfolio. The DOW continues to be criticized for various valid reasons, but remains a decent index. Here it goes:

I ended up with 15 stocks from the 3 exchanges, split into 4 different categories, in each category i tried to limit the amount of duplicates (so each category has a variety of business sectors or risks) based on conclusions of my research, i'm not gonna go through each individual stock here because that would take a few pages of text, but i'll briefly summarize the categories and explain the reasoning behind the divisions, aswell as point out a few of the stocks.

Group A: This group involves only 3 stocks, but represents no less than 38.30% of the total. In this group i put: FED, CR and SAS.
Brief reason to put these 3 here: all are in different biz sectors, and all are better than all others in their category.

Group B: This group involves 4 stocks, and represents 34.04% of the total. In this group i put companies which didn't beat the 3 above, some came just short... SLG, ISE, DDE, RDX. The one reason i see to criticize this group is that both DDE and RDX are in same group, the simple reason why those 2 fit here is because their models are quiet different. If one marks-to-market the land those 2 companies hold, RDX is beyond bancrupt, while DDE is still at some distance from it.

Group C: This group involves 5 stocks, and represents 21.28% of the total. In this group i put those who don't quiet qualify for "B". TFIG, CAR, FAG, ZEN, MLS. A well diverse group, a financial services company, 2 content developers, one content reseller and a landlord.

Group D: This is the smallet of them all, just 3 stocks, and represents only 6.38% of the total. Also very important companies to the market, unfortunately despite their great efforts i found out they couldn't qualify for the higher levels. Those companies are: ITA, NIC and VST

Here's the complete list, from my spreadsheets, based on equal weith on each group member in it's group.
Ticker - Weigth - Sector
FED    12.77%    (A - Content development)
CR    12.77%    (A - Land)
SAS    12.77%    (A - Currency)
SLG    8.51%    (B - Currency)
ISE    8.51%    (B - Financial Services)
DDE    8.51%    (B - Land)
RDX    8.51%    (B - Land)
TFIG    4.26%    (C - Financial Services)
CAR    4.26%    (C - Content development)
FAG    4.26%    (C - Content sales)
ZEN    4.26%    (C - Land)
MLS    4.26%    (C - Content development)
ITA    2.13%    (D - Land)
NIC    2.13%    (D - Land)
VST    2.13%    (D - Financial Services, and content development)

And that is where 40% of the raised 59400.00 L$ would be allocated. If one does the math on this portfolio, this would return more or less 1.2% / month on invested capital. That's if shares were purchased on the mid-level of the trading averages, with smarter bid placements one could do about 2%. And one can do another 2% a month easily from flipping the shares. Which isn't a fantastc rate of return, but it's not bad. The bad part is the risks involved doing this, and the best case scenario if one successfully navigated the risks at the end of the day isn't worth celebrating.

The solution to this challenge, has always been in the history of mankinds approach to business: to make an obligation (a contract stating a debt). The most common, and most simple form is a fixed-term loan, and for same reason it's the one best suited for consumers rather than business due to it's inflexibility and fixed-costs (also often referred to as "last resort"). The 2nd most common are floating rate loans, which are slightly more flexible. And then there are also exchange traded bonds, which have lots of flexibilities on top of what both fixed and floating term loans have, but still rarely suitable for a "paper company" (or for dealing with equity investments, given the risks for the creditor are pretty identical to the risks associated with where the borrowed money would be allocated at end of the day the creditor would have to be compensated almost equally, hence risk-to-reward here is not worth taking). There is however a way, it can become painfully expensive, but that comes at the advantage of having zero "borrowing expenses".

With this index i presented here above, which i hope we can agree will not satisfy everybody but it does reflect quiet accurately the most fundamental stocks, and with that the overall health of the market. If you happen to believe that the propability of this index going down is just as good as the propability of it going up you're going to love this product...

The Invesrse RA portfolio X2 (to be lanched by RA as a seperate IPO)

If you happen to be a follower of Hugo's "predictions" for 2010 that this year is the last, or propably you happen to follow Duke Mercy's conclusions that sl stocks are ponzis, maybe you have your own bearish predictions... Or maybe you're just another person like me, who want to navigate the market and profit from it regardless of which way it goes ?

As i described in the VSIF thread, this would be the function of this inverse fund, in case you missed it here's how it works (briefly):

As i stated above after RA ipo fills its networth would be ~100k. Now RA also sells-short this inverse product (sells an IPO with the obligation to buy it back, tracking twice it's movement), we'll place it on a simplified balance-sheet:
(please note that i add the cash from this products IPO on top of RA's existing cash)

ASSETS:
Cash: 109400.00
Stocks: 40304.59
Total Assets:  149704.59

LIABILITIES:
RA-InverseX2: 50000.00

Networth: 99704.59 (this at this point is same as in the balance-sheet above, with the exception of more cash and a liability line, the effects of which i'll show below)

Let's suppose this index is worth 10% less some time from now, in such case on your investment in RA you'd lose most likely more than 10% (depending on how close RA's current portfolio would be compared to the "desired portfolio"... a big PS! here: the portfolio of the inverse product will never change, that will be set before it goes to IPO so everyone knows what they're buying. While RA on the otherhand will be a managed fund which will have some room for changes, like any other managed fund). For now, for sake of simplicity in this example let's suppose RA didn't invest any of the funds and the "desired portfolio"-index dived 10%.

ASSETS:
Cash: 109400.00
Stocks: 36274.13 (down 10%)
Total Assets:  145674.13 (down 2.7%)

LIABILITIES:
RA-InverseX2: 60000.00 (up 20%)

Networth: 85674.13 (down 14%)

In this case as you can see, you could have made a risk-free 6% profit, that is if you invested an equal amount into both RA and RA's inverse product (before dividends), while if you only invested into this bear product you'd make a nice 20% return.

In the opposite scenario (index increase of 10%) you'd lose 6%, if you also put same amount of money into both. While if you put all into just RA you'd make more than if you did invest directly into the stocks RA holds (that's on top of trading profits and dividends).

I hope you found this interesting and i'm looking forward to hear your feedback on this.



PS!: By voing for this one you're also voting for RA's 1st IPO product (the inverse fund), of course if this one passes and RA wants to launch another product that will go through normal vote (so this is not an attempt to gain "auto-approval" for all future IPO's, but rather to merge the 2 into one vote/discussion.