Well, often they don’t own their own IP.
Maybe not in games softwared, but that’s a small fraction of the software market where a loan is a feasible strategy.
In the commercial and industrial industries, that’s exactly how something like a rotating line of credit for payroll purposes would be handled.
Shocking? Good joke. Yeah, shocking! Hahahahahah!
Anyway, at this point, I want to see what CIG will say. It will be interesting to see them trying to spin all this as a normal thing, or even a good thing.
We have new ships for sale!
You can now visit the new space station sponsored by RBS, or enjoy the new RSI Constellation Bank of America edition.
To a random dude on a neogaf forum?
Pretty sure they aren’t going to say anything.
[quote]We have noticed the speculations created by a posting on the website of UK’s Company House with respect to Coutt’s security for our UK Tax Rebate advance, and we would like to provide you with the following insight to help prevent some of the misinformation we have seen.
Our UK companies are entitled to a Government Game tax credit rebate which we earn every month on the Squadron 42 development. These rebates are payable by the UK Government in the fall of the next following year when we file our tax returns. Foundry 42 and its parent company Cloud Imperium Games UK Ltd. have elected to partner with Coutts, a highly regarded, very selective, and specialized UK banking institution, to obtain a regular advance against this rebate, which will allow us to avoid converting unnecessarily other currencies into GBP. We obviously incur a significant part of our expenditures in GBP while our collections are mostly in USD and EUR. Given today’s low interest rates versus the ongoing and uncertain currency fluctuations, this is simply a smart money management move, which we implemented upon recommendation of our financial advisors.
The collateral granted in connection with this discounting loan is absolutely standard and pertains to our UK operation only, which develops Squadron 42. As a careful review of the security will show and contrary to some irresponsible and misleading reports, the collateral specifically excludes “Star Citizen.” The UK Government rebate entitlement, which is audited and certified by our outside auditors on a quarterly basis, is the prime collateral. Per standard procedure in banking, our UK companies of course stand behind the loan and guarantee repayment which, however, given the reliability of the discounted asset (a UK Government payment) is a formality and nothing else. This security does not affect our UK companies’ ownership and control of their assets. Obviously, the UK Government will not default on its rebate obligations which will be used for repayment, and even then the UK companies have ample assets to repay the loan, even in such an eventuality which is of course unthinkable.
This should clarify the matter. Thank you. [/quote]
This definitely isn’t normal.
Firstly, why do they tell us the name of the bank? Secondly, why do they use three adjectives when describing it? Thirdly, why do they call it an advance when it is a loan? Fourthly, what are they shiting on about with currency fluctuations? EUR:GBP has been hovering within 2% of 0.85p for the last year with not a huge amount of volatility in there. USD:GBP has been similar. In fact, both have been at their lowest volatilities in the last ten years. Fifthly, there isn’t a hope that an expected but not guaranteed Government tax rebate is the ‘prime collateral’ for an institution as canny as Coutts.
I have no idea why they’re borrowing money, but the reasons they give stink and the whole message feels thoroughly wrong. Name dropping, mentioning possibilities only to say that they’re impossible. Etc etc.
Borrowing money to fund continuous expenditure ain’t a great sign. I mean, they’re borrowing money to spend so they can claim tax rebates on the borrowed money to repay the borrowed money, while being charged interest.
It’s no longer restricted to Neogaf, just so you know. It’s making the rounds already, and will probably get around even more tomorrow. So yes, they should respond to the “speculation”.
And there we have it.
Well, their explanation actually makes a bit of sense. If getting a loan and paying the installments would in the end be cheaper than the currency exchange and taxes to transfer money from the US, it might be a standard thing. The odd part is the collateral.
So here’s something to think about. The documents mention a “Game” that is being licensed by the bank to CIG. If it isn’t Star Citizen, and the UK only develops Squadron 42, then it surely refers to Squadron 42? It only makes sense, right?
Oh well, I guess we’ll never know the exact truth.
They still need to transfer the same amount of money, they just do it at different times. It saves them nothing in regard to currency exchange.
It’s interesting to see all the people who never post about the game itself jump on a random internet post to proclaim doom and gloom. Guess internet drama is much more interesting than waiting for a game. Fair enough. But there are also a number of people (not necessarily on this forum) actively hoping for the game to fail. That part, I don’t get as much, even if said people don’t like the funding model for the game.
Development still provides jobs in several countries and gameplay streams by early players look awesome. Though content is still admittedly too limited for me to feel like playing right now. Sure the game is taking a looooong time. Don’t invest in it until it’s baked enough for you. Simple.
As for Roberts’ excesses in development, RSI posted a kind of unboxing meets gameplay stream from WCIII last week:
It’s very clear watching the gameplay portion (or for those of us who played the game) that that crazy attention to detail has always been part of how Roberts develops his games. I think it’s sustainable, if slow, which is why I invested some money in it. If you don’t feel like supporting it, by all means don’t. But don’t act all surprised that that’s how the game is being developed.
Wendelius
I find the glee with which some people await the ‘inevitable demise’ of Star Citizen strange. I find the cultishness of the seemingly typical Star Citizen fan far more disturbing. Have you seen the Star Citizen reddit? It’s creepy as hell, and far worse than Tesla (which is terribly cultish itself).
I disagree with any assessment that Smart was right.
If he said that tomorrow the sun is going to explode and the earth will end, and tomorrow comes and goes on to another day does that qualify him as a savant when the Earth dies from an exploding sun in a few trillion years?
Could SC have trouble in the future, I think everyone believed that was possible as there are a ton of factors in play.
But Smart’s big deal was SC was going down like over a year ago. I think he put his chips all in and lost that bet.
Exactly, smart had been proven wrong over and over again. His opinion means nothing. The hilarious hypocrisy when you look at his own game is just icing on the cake.
I don’t read the SC Reddit, but I can totally believe it’s cultish and unpleasant to read. I once took a peek at the RSI General forum and ran away pretty quickly. I don’t get that anymore than the glee at every hint of drama.
Games can be polarising. SC pushes the boundaries though.
Wendelius
It may be “normal” or OK to get an advance on your anticipated tax breaks, but the last time I worked at a company that was doing that instead of just taking them when you normally get them was doing it because they had no cash flow and required the money now. That was 38 Studios and it was a desperation move for them at the time.
Maybe it’s different for these guys though.
It sounds like a payday loan thing for corps. I would love to see these guys finish this project, but I’m not giving them any money until it is complete and released.
I’ve worked at a high-level in a number of software firms that have frequently used development tax credits of one stripe or another and have been intimately involved in all stages of the credit process. While it’s easy to claim “not normal” on one of these credit advances, the reality is that: A) the development credit is budgeted as a line-item (and expected as such), and B) governments are notorious for not delivering these credits on-time (I’ve received these cheques 18 months late in some cases). The result is that it’s unfortunately common to lean on some form credit facility to bridge the gap until the delayed credit is received. I’m not saying that’s the case here, but having spent significant time literally biting my nails over a delayed credit, this doesn’t strike me as abnormal. IF, that is, that CGI’s version of this being a development credit bridge is accurate.
That said, I still think SC/SQ42 is screwed. I just don’t think this is necessarily the sign people are taking it as.
HMRC are incredibly efficient.
I don’t get why a game company that has taken in ~ $150M would care at all about some minor tax break unless they have been spending the money as fast, or faster, than it came in?