2 Stock markets loopholes , 1 weird thing , and 1 bug

[Pietro]

This post is the the following of this one http://www.capitalismlab.com/forum/view ... =16&t=3891 about an exploit on the other DLC City Economic Simulation, that is more appropriate located here since it is based on the use of subsidiary company.


First are some screenshots and explanation about a method to basically have infinite money that was roughly explained on the other post.

But while taking all these screenshot I came across a situation that is problematic in the sense of the game is not supposed to behave like that in my opinion , this mis-behaviour is not necessary for the exploit to be possible , but might opens up some others.

And finally because of messing too much with the game I hade an error pop-up so at the end is the report.


About the loopholes

There is a description linear in time of what was made on the save game attached ; I set to the lowest amount of starting cash , 15 million , and no competitors. It is possible to do it with as many competitors as you want , but it adds another step to the thing , which consist into neutralizing their action on the stock market by buying them switching the orders of execuion of the tricks explained later. This is a description of some manipulation done right at the start of the game when the time is still paused.

The first trick used is to leverage the 15 million , in order to do that I borrowed maximum money, so I had 30 million in cash. I created a subsidiary via a 20 million cash injection, which is the minimum amount of money to create one. I called it S1, and used it to borrow 20 million. Leaving me with "ONLY" ( the name of the main corp ) with 10 million cash left and 15 million debt , owning 100% of S1 with 40 million cash and 20 million debt.

Then I introduced S1 on the stock market, as 1 injected 20 million at its creation , with a 20% dilution share , I ended up with a 25 million market cap subsidiary " S1 " , owned at 80% via " ONLY ". Share price : 10 $

Then I sold 5% of the "S1" stock I kept after the IPO, I had 80% of ownership going down to 75 %; This action causing the share price to drop from 10$ to 9$ as it shows a manifest lack of confidence into this subsidiary from the main corp, so I could only sell my shares at 9.50$.

"S1" share price dropped by 10% its market cap was no longer 25 million , but 22.5 million . owned at 25 % by public share-holders , and 75 % by " ONLY "

At this point I merged " ONLY" with " S1 " , so I had to pay the 25 % in 1 purchase , with a stock price of 9.00$.

This mean when I issued share it was 20 % at 10$ that went in my pocket , then I sold 5% at 9.50$ , Then I bought 25% at 9$.

This is easy money.

And the cash and debt of both companies are merged , now the only corp left is " ONLY " ( that's why the name sorry if it makes it confusing ) , It has the 40 million borrowed , and the money made via the IPO trick. Debt are merged too so I'm now 35 million in debt .

This is infinite loan.

So in the save I started with those and repeated the processes quite a few time , If there were competitors , I would have only done the infinite borrowing money loop , without the IPO trick , until I have enough cash borrowed to control all opponents so they wouldn't interfere with the IPO trick.

The more you repeat those steps , the more each step is effective , as the S2 you can give it the cash earned at previous step. Without precise mathing of the problem you can roughly keep 1/3 of the money you have and inject the rest in the next subsidiary.


This was a preliminary setup.

SYNTHESIS :

make a sub with minimum cash
borrow all you can with sub
make ipo with sub
sell 5% with main corp
merge both


Now the Real Deal :


I had leverage the initial 15 million to 500 million , using method described precedently , just to demonstrate that competitors doesn't really matters , and you can generate artificial cash.

500 million is the amount of money you are given when you start with high cash as a a public company, or if you borrow the maximum amount of money with a private company start.


The next thing to my agenda of this 01/01/1990 , is to make those several millions become billions , this using another series of steps. With 500 million it is way enough to do it without precise maths.

It is done in 2 parts , the first one is GIFT setup , the second one is offering the GIFT.

The GIFT is a company , that can be seen as a wallet full of money that you can buy for the price of just the wallet.

So first thing to do is to fill the wallet.


So I created a subsidiary called B1 with rougly 300M out of those 500M. Out of the "ONLY" corp left.

Then IPO B1 with minimum dilution share , and borrow all the money I could.

With 100% that money I created a subsidiary called B2.

Then IPO B2 with minimum dilution share , and borrow all the money I could.

With 100% that money I created a subsidiary called B3.

Then IPO B3 with minimum dilution share , and borrow all the money I could.

With 100% that money I created a subsidiary called B4.

Then IPO B4 with minimum dilution share , and borrow all the money I could.

With 100% that money I created a subsidiary called B4.

Yes I did screw up on that having a Yellow B4 and a Blue B4.

That didn't stopped me borrow all the money I could.

At this point we have a pretty big amount of money on Blue B4 account.

Now we need a cheap wallet.

At this point I created a subsidiary with 20 million fund , instead of using all the money on Blue B4. I called it GIFT.

Then I saved the game , GIFT SETUP. here is a screenshot of what you will have loading the save



And you now know how it was setup.

Now you can inject the Capital from blue B4 to Gift :



giving you this picture



Then make GIFT public via IPO



and I guess in between those two lies the problem since it leads to that situation :



You can clearly see a company called GIFT, with a market cap of 25 million , which owns 14 billions in cash

that's what I called a full wallet at the price of the empty wallet.

Then you just have to sell GIFT stock with blue BU4 , if you try to go under 50% you will lose control , then AI take control and buy back its own share , then you regain control.

I tried with different personnality AIs but didn't find anything there

So i basically ended up like that :



this in order to be able to buy that wallet , with the "ONLY" corp at an even lower price.

But the SEC is not letting me buy that.

Next step of the plan is to sell some B1 so i loose controll of the all B1 B2 B3 B4 B4, right ?

because if i sell some B1 till i lose control , i will lose control of B2 , which make me will loose control of B3 , which will end up making me lose control over GIFT

that would allow me to buy GIFT stock with the " ONLY" corp according to the SEC.

So i sold 55 % of B1

AND HERE IS THE WEIRD THING





There is no reason i still have control over B3 B4 and B4 but not B1 and B2 , I own 45 % of a company B1 and i can't see them in the list on the bottom left

this B1 owns 80% of B2 , so B1 control B2

I don't control B1 therefore i don't control B2

B2 owns 80 % of B3 , so B2 controll B3

I don't control B2 , but for whatever reason i still controll B3 and the rest of chain.


My possible explanation , is it's because GIFT will buy some B1 when you go under 50 % of B1 ownership with " ONLY"

and thats makes weird things ...... x)

I managed to have it the other around , the save is at the end under the name or GIFT WEIRD


This one you own 80% of B1 that own 80% of B2 that own 80% of B3 that own 80 of B4 ect

But your control stops after B2

I really think this is showing something different than what is used here , that could be a source of more exploit

screenshot at the end as it is not in the same time-line

BUT IT IS STILL NOT ditstracting me of buying that wallet

as you can see here i buy some GIFT , real good deal





This is not suppose to happen , i kept 300 million cash on " ONLY" to be able to overpay gift from B4 because i'm not suppose to control them

but as i do better sell some stock of gift to lower the price even more x)



It is so cheap that i can't stop at 75% and spend too much to buy 87% before the merger , so a more expensive merger than expected , will cost me around that



i pay 4 million to merge my company with another that has 0 debt and 14 billion cash

OFC i do

and you can do it too because there's a save called GIFT MERGER at the end , that was taken at that precise step


What you will need to do next to have a perfect clean situation , is to pay something like 72 million to rebuy 20% of B1 and merge with it;

That will gives you back the controll of all sub ( which is again i say it weird but not necessary as all sub would have go bankrupt anyway ) but it allows you to use B4 and make it spend the money it received for the sell of GIFT to the bank , so all subs have perfectly 0 $ and huge debt.

then you can put speed 1 , and just declare bankrupcy 5 time .

then pause again. It's done by the 11th of the 01rst month 1990.

and gives you this final result you can see one the save GIFT OVER at the end.

where you can see all the logs of what happened from the first leverage of the 15 million to the present situation . I tried not to do unecessay steps that's why I kept 2 B4 rather than trying to make better screenshot by removing one and recreating one .


But It happened once and i couldn't have it happen again so far this :



It happens before declaring bankrupcy of the second sub at the very end of all of this when i put the game in speed 1 , as far as i remember , you'd ask me what if you want more information than that ^^.

here is a screen of the logs :



here is a pic that describe the problem " the other way around " that i can only put there because it is not chronological and it would not be clear if added before





as far as i'm concerned that no longer ruins the fun of the game , it is part of the fun of the game now , as i really enjoy searching for those , but that still makes me a bit weird retiring hyper dupa rich after 2 weeks , not having even enough time to know if i would have like the job x)


I hope it is of some help ^^

[eleaza]

This is the longest post I ever seen, but in great details.

In short, the 2 loopholes are
1) you can create subsidiary and go IPO, with some stock market fair price calculation issue, you get more cash when merger back again.
2) you can use some very elaborated process, and gain as much money as you want like infinite money cheat code in the first month of the gameplay, involving deliberately laundry money out of nested subsidiaries and leave all the intermedium subsidiaries go bankrupt and avoid paying back loans.

1 weird thing is the nested subsidiaries' ownerships don't work as you would've expected.

And the bug error message is "Error on File : stock.cpp Line : 563"

[marty]

Thanks for sharing. It's pretty overpowered and would take all the fun out of it.
Not sure how this one will be fixed, the most overpowered part seems to be the ability to inject a ridiculous amount of cash into a subsidiary that only has a small number of shares, leaving it easy for your main corp to take over and merge with.

[Spac3y]

You could control this by putting in a max amount of subsiduraries created in a year. You could also probably put in place something that says you cannot merge a company that has been ipo`d for say 2 years.

[eleaza]

You could control this by putting in a max amount of subsiduraries created in a year. You could also probably put in place something that says you cannot merge a company that has been ipo`d for say 2 years.

There is an older solution, where before subsidiary DLC, the only way to inject cash is for the sub to issuing share to the parent company. Hence when it gains more cash, so does its market value. And we can make a similar mechanism to make it reflects its true value, especially when most assets in a sub are in the form of cash.

[marty]

You could control this by putting in a max amount of subsiduraries created in a year. You could also probably put in place something that says you cannot merge a company that has been ipo`d for say 2 years.

I think it would be less severe and better just to have a company's net worth (including its cash) be all taken into account in the number of shares issued at the IPO i.e. the market cap reflects its assets

[David]

You could also probably put in place something that says you cannot merge a company that has been ipo`d for say 2 years.

This is doable. Do you guys want this to be implemented in the next version?

[marty]

You could also probably put in place something that says you cannot merge a company that has been ipo`d for say 2 years.

This is doable. Do you guys want this to be implemented in the next version?

I'd prefer something less drastic. If the market cap reflects a company's worth at IPO that would be sufficient, and it makes sense anyway doesn't it?

[Spac3y]

Id be quite happy with it to be honest.

Look at the actual case when IPO`s happen. More often than not when a company IPO`s the main holders cannot sell stock for a certain amount of time so I dont think its a bad idea.

Equally, if your creating subsidies, you generally arent going to ipo them and sell them quickly unless your trying to do this exploit. What may happen is you may make a mistake perhaps in terms of assets allocated to the subsidiuary and it ends up loosing money.

You could fix this by adding a liquidate button where everything is sold off at cost and returned to shareholders hence no gain / no loss dependent on Stock Price

[eleaza]

You could also probably put in place something that says you cannot merge a company that has been ipo`d for say 2 years.

This is doable. Do you guys want this to be implemented in the next version?

I don't think this implementation will actually seal the exploit, only delay it. Since a player can still use the same amount of money to get a fat wallet sub, buying it cheap, and just let it sit there doing nothing for 2 years, and merger it back to get the cash. The issue isn't at the time of the merger when cash "moves back" to the parent, but "move cash downstream" in a chained nested sub, and able to avoid paying loans in the intermedium subs, by bankrupting them. We don't even actually need to merger this sub back to get the ill-gained cash.

If you pay attention to what I discussed with Pietro, notice there are other slower ways to launder money back we talked about. The exploit shown here is just the one with the fastest possible return dates (for shock value). If using other methods to launder money back, then we don't actually need to wait for 2 years. Probably about 6 months with tech swap exploit; Using selling/reselling trick depends on the quantity of the transfer, but it would be a constant income out of nothing; Even just moving the cash to the city hall, and laundering back with inflated land price; Or to political party account for easy early election victories, etc. etc. (and other stock market exploits can be used to tunnel money back)