What’s been announced?
What could have been a regular Wednesday on the Index quickly turned into a rollercoaster of a day when it was announced on Tuesday evening that there was going to be a midweek bombshell dropped on traders.
The news that broke was the introduction of a new dividend being paid out for goals and assists. This new dividend is 2p and 0.5p per share for goals and assists respectively, but wait there’s a catch. To qualify for the dividend the shares you own in that player must be *new.* what does that mean? They went on to define new as “purchased within the last 30 days”.
Football index has emphasised this is only a trial, and in order to win these dividends, the shares must be purchased in the promotional period, which began on Monday according to their terms, after which, they are valid to win these dividends over the next thirty days as stated above.
If you want to read more about this you can do here: https://trade.footballindex.co.uk/goal-and-assist-dividends/
So how did the market react?
Possibly the opposite of what you would expect from an additional dividend, but it was arguably justifiable when you look at the way it was delivered. The news was hyped up incredibly from multiple tweets and emails expressing “a new dividend mechanism,” causing lots of excitement and anticipation. This caused many to begin buying those at the top of the market early in the day.
When the news broke, I think it was the idea of “new” shares that put people off. So after an initial spike, where Neymar even peaked at over £16 for the first time, the rise tailed off and although many players closed the day higher than they started, they were nowhere near their peak.
The reaction wasn’t great, but there are positives. This change is only providing an addition to the platform. No current dividends have been axed or changed and there is no obligation to try and get involved in winning these new dividends. Additionally, those that do win them are likely to reinvest into the market to continue the increase in capital. It also makes assists worth something extra, which many people have been crying out for since the performance scoring matrix was announced.
However, there has been plenty of valid arguments surface since the new dividend was announced. Firstly, it seems to add more complications to an already possibly complex dividend system to grasp as a new trader. The cut-off point to buy and earn dividends is midnight of the day the game is played, meaning you can buy after the dividend earning goal has been scored, which is different to the current 2pm cut off for the other dividends. Also, knowing exactly how long you’ve held a player for is not always easy in a large, liquid portfolio, which could provide further confusion as to whether you have actually won a dividend or not. You then have to wait until the end of the month to see if you get paid out for it, which doesn’t seem ideal.
Another potential drawback is the change to the market value of certain types of players when it was recently stated consistency was something the Index was looking for. This specifically affects defenders, and other players not expected to score as frequently as others, and while it is true that other dividends will remain the same so they haven’t technically lost anything, when others become more valuable, that money has to come from somewhere in a market with limited funds, and effectively decreased the defenders worth overnight.
An index point of view
At the end of the day though, the index isn’t here just to line our pockets continually for doing nothing. They are a business, and they have to look at their own model. The obvious advantage of this new dividend comes from the eligibility depending on being bought in the last thirty days. It encourages trading and not just holding your portfolio for three years and sweeping up dividends while paying nothing into their pot. This idea will help improve liquidity, in-game trading and overall, the commission the company earns. Which is a good thing. I’ve seen some opinions interpreting it as “money grabbing” but in reality, it is something they need to be a stable company. It isn’t as if they have just increased commission to 3% for example. They are still offering a reward for your trading and aren’t forcing anyone to trade more than they usually would.
Overall I think the biggest issue is it was perceived as over promised and under delivered by many. Had they have just sprung the announcement with less build up as a promotion I think the sentiment of traders could have been a lot different. Let’s also not forget though, this is only a trial period, in which time they will be assessing and accepting feedback, so it’s not the end of the world for the platform, just not the rocket ship many were expecting.
Have an opinion on the matter? Feel free to comment and discuss the implications of this new change wherever you find this article!