Every time you shop on Amazon using iConsumer, iConsumer becomes worth more. Since you’re an owner, your ownership becomes more valuable. Because Amazon is special, shopping there has an outsized influence on iConsumer’s fortunes.
To make our lawyers happy, I need to say that your ownership in iConsumer is valued at what somebody will pay for it. I like it a lot better when the price goes up, but we cannot promise that. It’s my job to help it go up. But at some point, it may go down, even if I do my job spectacularly well. I want to remind everybody that there’s risk involved in owning stock, especially in an early stage company like iConsumer.
But I know that iConsumer is worth more than it would be otherwise when people use us. It’s a smarter way to shop because you own a piece of the company. You share in iConsumer’s change in value. And the best way to for you to help that value go up? Shop at Amazon.
Most of our members love Amazon, but they say “why bother using iConsumer?” because they don’t earn cash back from those purchases.
Amazon doesn’t allow you to earn cash back at iConsumer, but iConsumer earns about 5% of your purchase, and that translates into goodness for us, and for you.
We’re on our way to having 1,000,000 shareholders, many of whom are first time shareholders in a public company. They’ve never worried about the stock market or how to value companies. This post about Amazon, and that special goodness, is mostly for them. If you’ve already been exposed to this kind of discussion, just read the key take away below.
Here’s the key take away, even if you’re an experienced investor: When iConsumer earns money, it should translate into increased valuation, often at a rate much higher than 1:1.
Let’s put some numbers to this. Sigh, I know, math. But this is important. It’s about making money in the stock market, and that’s all about numbers. For purposes of this example, I’m going to assume that our 40,000 members shop just once at Amazon on Prime Day because the deals are so good. After searching for Amazon coupons, they each buy something for $10. That would mean approximately $20,000 in cash (commission revenue) for iConsumer.
Members 40,000
Transactions per Member 1
Purchase Amount $10
Total Purchased $400,000
Commission at 5% $20,000
Expenses $0
Cash to iConsumer (Earnings) $20,000
New Members Are Good
First, we’d spend that $20,000 on recruiting new members. That would mean we’d gain about 5,000 new members. That adds to our value. To estimate how much it might add, we look at competitors and how investors have valued each of their members. We see that, in the past, each member is worth between $200 and $384. Using the low end of that range, that could be a $1,000,000 increase in iConsumer’s value.
The Magic of the Multiple
Alternatively, maybe potential investors choose to value that $20,000 as a multiple of earnings. The price / earnings (“PE”) ratio. Again, looking at our competitors to see how potential investors might treat this, the PE ratio was all over the place. According to gurufocus, the highest PE ratio for one of those competitors was 257, and the average for that company was 48. Let’s say our PE ratio is 50. Using these assumptions: 50 times $20,000 = $1,000,000 in additional value.
Multiple Magic
Additional Earnings $20,000
Price to Earnings Ratio (Multiple) 50
Additional Enterprise Value $1,000,000
So how does that affect the stock price? Again, we’re just using assumptions about how the market (potential investors) might view $20,000 of additional cash. Potential investors may view it differently, so, making the lawyers happy, this is not a promise. And, I’m going to ignore the stock those 5,000 members might get.
We’ll use $.09 a share as the current price of the stock, since that’s the last price at which we sold stock. And, a last bit of information. There are approximately 210,000,000 shares of iConsumer stock.
More math. 210,000,000 shares times $.09 a share = $18,900,00. That is, actual investors valued iConsumer at $18,900,000. If you have 100 shares, the market valued your 100 shares at $9.00.
Today
Share Price $.09
Shares Issued / Outstanding / Earned 210,000,000
Enterprise Value $18,900,000
100 Shares $9.00
What happens to your stock price when we add $1,000,000 of additional value into the picture?
After Amazon Prime Day Activity
Enterprise Value $18,900,000
Additional Enterprise Value (@ 50 multiple) $ 1,000,000
New Enterprise Value $19,900,000
Shares Issued / Outstanding / Earned 210,000,000
Share Price $.0947
100 Shares $9.47
$1,000,000 plus $18,900,000 equals $19,900,000. We still have 210,000,000 shares outstanding. Divide 19,900,000 by 210,000,000, and you get $.0947 per share. If you have 100 shares, they should now be worth $9.47. In this simple example, your $9.00 worth of shares increased in value 5%, from just one good day at Amazon.
And that’s why you should use iConsumer to shop at Amazon. And not just on Prime Day, every time you shop online.
P.S. The accounting types out there are saying “but you spent the $20,000 on recruiting members so it didn’t affect earnings that way.” That’s right, but it turns out that new members are shopping enough already to pay back the cost of recruiting in their first year of membership. Which means that, if these 5,000 new member shop the way the first 40,000 shopped, that $20,000 really does make it to earnings. If you have any questions about this post, feel free to add your question as a comment below and I will get back to you.