New ones can't be created AT ALL as that would dilute - which is strictly banned.  So rather obviously the pricing restriction can't apply to that.

A pricing restriction can ONLY apply to the issuance of shares as active - shares that are authorised but unissued (and even ones in treasury but unlisted for that matter) don't have a price as they aren't transacted.  A pricing restriction can only apply to when shares are put up for sale - as that's the only time they actually have a price.

Now explain the second sentence.

The private stakes in the company were NOT held as part of the issue made on MPEx.  They can be privately traded however their owners want - it's totally irrelevant to those holding MPEx shares.  The second ssentence referred to the means by which additional shares could be issued on MPEx - which is what happened here.

You're about the third person to quote that sentence - which noones disputes the meaning of - whilst totally ignoring "All future share issuance will be made only a) subject to approval by MPEx and b) at a price no less than the higher of the 1 day average price and the 30 day average price then current on MPEx ; " which is the bit in question.

That refers to issuance on MPEx (issuance on other exchanges is barred and the contract is silent on the private off-exchange ownership of the remaining 90% of the profit stream).

100 million shares were authorised.
10 million were issued on MPEx.
The other 90 million couldn't be issued on an exchange other than MPEx, COULD be privately issued off-exchange and could only be issued on MPEx in compliance with the defined pricing policy.

It's not THAT hard to understand.

Provided the number of shares in existence on MPEx didn't grow over 10 million then he could do whatever he wanted - as there'd be no new issuance.

Doesn't matter whose they are - they're freshly issued shares on MPEx.

Having private investors who owned equity off of MPEx was entirely valid under the contract.  But the contract specifically defines the minimum price at which they have to be sold if they're issued on MPEx - and only the original asset issuer can actually issue new shares on MPEx.  In theory a private owner of equity could create their own security backed by the portion they own of S.DICE off-site but then it wouldn't be part of the same security (and would presumably be valued lower due to extra counter-party risk).

Someone (whether evoorhees or a private stake-holder I can't tell) wanted cash in a rush and decided to run over the contract to get it.

Note that if there's a private stakeholder, evorhees CAN'T just create new shares in MPEx and transfer the shares to them (then they sell at whatever price they want) as the issuance has to be made in accordance with "All future share issuance will be made only a) subject to approval by MPEx and b) at a price no less than the higher of the 1 day average price and the 30 day average price then current on MPEx ; ".  And any creation of new shares in the MPEx offering IS an issuance - it's precisely what issuing is.

Wrong.  Only 10 million shares were issued on MPEx prior to this.  This issues new shares on MPEx.

The company could privately sell a portion of the company off-exchange at whatever price it wanted (it's barred from issuing/selling shares on another exchange) - but if it did so by issuing more shares on MPEx the contract applies defining a minimum price.

The second sentence refers to releasing more shares on MPEx - what just happened.

100 million shares were authorised, only 10 million were issued.  The second sentence defined the price as which new shares have to be sold - which is what just got broken.

The issued 10 million represent entitlement to a share of profit - not ownership, which is why not all 90 million had to be issued at once.  Note that even IF the 90 million were considered to be treasury shares (which are considered in general to be issued as well as authorised) they had ABSOLUTELY NOT been issued on MPEx - and the sentence of relevance refers very clearly to issuance on MPEx as opposed to issuance elsewhere.

If anyone can define any other "share issuance" whose price is restricted by the contract AND is possible under the contract then go for it - but prior to this there were 10 million share issued on MPEx and now there's more.  That's as clear a case of issuing shares as you can get - and the pricing of them a blatant breach of the contract.

No it's not dilution - I never claimed it was.

That sentence prevents dilution.  The second one prevented devaluation.

I guess the interpretation of the contract depends on whether the 100 million shares are considered to be authorised or issued.  As the contract makes no mention of allocation of the 90 million not sold in initial offering I would interpret them as having been authorised not issued - which then makes the second sentence (referring to pricing) actually relevant.  There was no point issuing the other 90 million as the shares don't give ownership of S.Dice and its retained earnings - just entitlement to a portion of profit stream.

100 million shares were authorised, each entitled to 1/100 millionth of profits but not owning equity.  10 million were issued initially.

If you disagree with that then what shares does "All future share issuance will be made only a) subject to approval by MPEx and b) at a price no less than the higher of the 1 day average price and the 30 day average price then current on MPEx" restrict the price of?

You need to read it in context:

"The representatives of SatoshiDice solemnly promise and warrant never to issue more shares on any other venue nor in any way to dilute existing shareholders at any point in the future. All future share issuance will be made only a) subject to approval by MPEx and b) at a price no less than the higher of the 1 day average price and the 30 day average price then current on MPEx ; "

Creating new shares would automatically dilute existing investors - and is thus totally banned.

The sentence defining pricing therefore makes so sense if it were to refer to the pricing of something which is explicitly banned.

I DO agree that the wording is a bit ambiguous - but when there's two things it could refer to (creating new shares and selling additional shares) and one of them (creating new shares) is explicitly forbidden then it lofically MUST refer to the other (selling additional shares).

Well it's about as serious a breach of contract as you can get - underselling the market when the contract specifically prevents you from doing so to any significant extent.  It'll be interesting to see how MPEx handle this - on the one hand they obviously don't want to lose an otherwise excellent investment such as S.DICE.  But on the other side of the coin they can't really allow issuers to blatantly break their contract if they intend to continue to be taken seriously.

What puzzles me is this:

From the S.DICE prospectus (referring to issuance of further shares):

"and b) at a price no less than the higher of the 1 day average price and the 30 day average price then current on MPEx "

Was the 1 day average price on MPEX REALLY .0044 or less?

NO.

The prospectus contained a clause specifically to avoid this.  I presume MPEx will now delist S.DICE for breaking its contract.  GG all.

Most of them will never understand it.

The simple truth with mining is that all the time it's profitable more people will keep buying mining gear - until it's no longer profitable (unless you have lower than average overheads).

Take something marginally profitable (mining) then take a hefty cut from turnover (NOT PROFIT) for an operator and what's left for investors?  If you said "a loss" - well done, that's the right answer.  There WILL be a short period during which ASIC mining is very profitable - after that it'll be back to mining investments making a loss as usual : with those whose pre-orders were stuck in USD whilst BTC rose starting off with having lost 1/3 or more of their asset value before their hardware even arrived.  The very profitable period could be over as soon as March - depending on BTC price and which ASIC manufacturers screw up (and just how badly).

How are you going to pay someone to run these tests when you haven't even got the funds to pay back tiny loans you took out months ago?

Possibly - it doesn't say anything about what he's doing in respect of his debt to namworld/BTC-MINING.  Given what he DOES say it seems highly unlikely he'll be making any significant repayment of capital - probbaly just some dribble of dividends over the next while that won't be a lot of comfort to BTC-MINING investors.

Better news for DMC is that BTCMC have paid (or claimed to pay) the old dividend they owed - so at least it seems likely that isn't a total scam.  I still expect yochdog to claim his expenses ate up nearly all the mined coins for the last few months though.

Well let's do some basic math.

2k BTC (that's after the 1500 fee) converted into USD and sitting in a bank account.
10 BTC per month profit.
So if BTC rises vs USD by more than 0.5% per month the value of assets falls faster than profit can compensate for (and that's BEFORE the profts get split between all shares).

Guess it's an investment aimed at people who think BTC will fall vs USD in the medium term.

Kind of amusing that it has trading to BTC-E built in.  Wonder just how many people will be dumb enough to allow a coin that was admitted to be a scam have access to trade on their BTC-E accounts.

Looking in my crystal ball I foresee some highly amusing "told you so" posts in a few months time - probably just after some new version of the client is released (binary only) and installed by gullible idiots who have let their guard down afer a few months of it not doing anything nasty to them.

When the ASICs are shipped doesn't matter - it's when they arrive they counts.  Avalons are looking like 2-4 week transit times - so if BFL ship a week later from the US their ASICs will still arrive and be hashing earlier (if receiver is in the US).

The other problem with buying ASICs at the moment is that all waiting time costs money when BTC is generally rising.

If company X buys now with 2 month wait time and company Y buys in 2 months with 2 week wait time later and in the meantime BTC has risen by 50% then even if the USD price paid is the same, company X has to mine back 1/3 of their purchase price in the 2 weeks extra they have ASICs to be in the same position as company Y.

Long lead times only made ANY sense to accept IF you were in the first batch.  The 2nd batch does NOT make bank - by time it arrives all of Avalon batch 1 should be mining, so should the first chunk of ASICMINER and quite possibly so will be the first BFLs.  They'll make a profit - but not a massive "pay it off in a few weeks" type of profit.  Because of that, if you think BTC will rise, one of the key objectives is to minimise the amount of time your funds are denominated in USD without you mining.  That means waiting until lead times drop.  It also has other added advantages:

1.  The price of ASICS may fall - once 2 or more suppliers are proven to be able to deliver, prices can only fall.
2.  You can be sure maufacturers can actually deliver in bulk.
3.  Any major problems will likely have been noticed - for all we know Avalons will only function for a few weeks before developing a fault: we can be pretty confident they haven't had any serious stress testing.

Imagine how bad it would be to get an Avalon, have it break down after a week then you realise it's a return-to-base warranty meaning even if they fix it for free you just lost a month of mining whilst it gos to China and back.

And remind me when did BTC get pumped/dumped then stop being supported for ages?

I can get BTC-E chat and trade stats from the BTC-E site without supporting the 2nd run of a pump-and-dump scam currency.

There's a difference between mining coins over a few years of developing the software from scratch (having invented the implementation in the first place) and awarding yourself a huge chunk of coins in the genesis block of a copy.

But no problem - so long as everyone remembers what happened last time: massive dump followed by the currency basically vanishing for ages.  Just don't get caught actually holding them this time - sell them as you mine them.

As the saying gos:

Fool me once - shame on you.  Fool me twice - shame on me.

Plenty of fools around here, unfortunately - who will fall for the same thing multiple times even if run by the same person/group.

Let me try another approach to explain why this 21 million BTC value cap makes no sense.

Is it possible to have 2 companies worth 11 million BTC each?
If so, what is the new company worth if they merge?

How about 4 worth 6 million each?

Or 22 worth 1 million each?

Do you see how, logically, if you say a single company can't theoretically be worth 21 million BTC then you also say that the sum of ALL BTC companies can't exceed 21 million BTC - as in theory they could all merge and would have an identical combined intrinsic value to the total they had when they were seperate companies.

It's a bit like claiming the "value" of all companies in the USA combined can't exceed 1.1 trillion USD (or whatever it is they have printed now) as that's all the USD that exists.

FYP

WHy would anyone be interested in a coin that had a pre-mine, was pumped and dumped and still doesn't release source-code?  Obviously those behind the scam venture would like to sell off the rest off the pre-mine but why on earth would anyone want to buy them?

If the source code is released then I guess no harm mining it and dumping the mined coins on BTC-E if it makes more than mining something else - but there's no reason to believe it's anything other than an attempt to pump and dump more premined coins.

WEEKLY REPORT




Another good week - not as spectacularly good as the previous few, but 13.58% growth (11.64% from trading) is perfectly respectable.  All sites other than Crypto chipped in with a decent share of profits again this week.

DMC - 'Long-term' investment

For the first time in quite a while we have what is considered in the contect of this fund to be a long-term investment.  That doesn't mean that we'll necessarily hold it for months - just that my expectation is that we'll be holding onto it for a week or more at minimum.

Why DMC?  After all, I've been very critical of its management in the past - and it's lost well over 90% of its original NAV.  Let's have a look at its holdings and see.

DMC (https://bitfunder.com/asset/DMC) presently has 11,579 shares.

Its current assets are:

106 BTC-MINING
1000 BTCMC
1000 ASICMINER

The BTC-MINING are likely nearly worthless - as bulk of their assets were loaned to the scammer AmazingRando.  These can be ignored for the purposes of valuing DMC (they have a tiny value not worth adding in due to a few BTC in their wallet).

The BTCMC are of dubious value - the operator of that company seems to be constantly stalling on giving out information (one excuse/delay after another).  They'll probably have SOME value - but likely less than the around 0.25-0.4 BTC each they should be worth.  It's probably reasonable to assume these add a value of around 0.01 BTC to each DMC share.

ASICMINER - This is where the real value is.  Each DMC share is effectively backed by 0.0863 ASICMINER shares.  ASICMINER has passed the biggest hurdle it faced - getting chips produced that actually functioned.  Its first batch of 10-12 TH/s of machines should be going online within the next few weeks.

At present ASICMINER shares aren't tradable - but they will be before the first dividend on them is paid.  Trades have been agreed - with recent prices around the 0.5 BTC/share mark (there's been more deals than are visible in public).  Unless something gos horribly wrong I'm expecting prices to rise even higher than that once proper trading on an exchange starts.

At 0.5 BTC per share the ASICMINER shares would add 0.4318 to the value of each DMC share.  Adding on even a fairly pessimistic value for BTCMC shares we get a value for DMC shares over 0.05.  That makes the 0.02 we paid for them rather good.  I doubt we'll sell the DMC for that until ASICMINER pays its first dividend and DMC pays half of it out (the other half being used to buy back shares) OR DMC sells its ASICMINER and we get to cash out that route.  But by waiting until then it's highly likely we'll get far more than 0.05 per share - as once ASICMINER is tradable AND paying dividends its price will shoot up: after all it has low costs (in CHina), makes its own ASICs (so gets mining gear WAY cheaper than other mining companies), the shares also get a share of profits from any sales of those ASICs (and from development of next-gen ASICs) and all profit gos to the shares until the initial 0.1 BTC/share is paid off.

So that's why I bought DMC at an average of around 0.02 - because I'm confident we'll be able to sell them at 0.05 - 0.1 within a month.  Our shares ARE up for sale on Bitfunder - but we're not the cheap ones at the bottom.


PASS-THROUGHS

Both pass-throughs paid their first dividends this week.

S.BBET - Made tiny profits and paid a miniscule dividend.  This was expected (by me at least) - though the site's trade seems to be disappointly slow (and I didn't have THAT high expectations for the first month anyway).  There's very little trade happening on the underlying asset at present - those holding shares aren't deterred enough to sell off at a loss and there's not exactly a stampede of people trying to buy them.  As I've mentioend previously, I have concerns that their fundamental business model is flawed - specifically that they aren't providing what their target market (fairly heavy betters) wants (fixed odds).  This issue is made worse by the weighting system.

I'd recommend AGAINST buying these at the ask price until accounts have been published and there's a clear idea of what the site's plan is to pick trade volume up.  Someone has already got a bid up on our pass-through near the Bid on MPEx - but so far I've had no luck getting my top Bid there filled to pass the shares on.  If you want to buy in then I'd suggest you put up bids in that area rather than buy from Asks.  If you're losing your taste for this share then there's only a 1K order at .001 on MPOE I could fill before the price fell (the 1200 at .00105 is mine and will disappear if the bids on the pass-through it's placed to try to buy to fill get filled or taken down).

S.DICE - In contrast this paid a dividend that was a healthy ~2.75% of current traded value.  In fact S.DICE had a slightly unlucky month - had results been at the expected house edge rather than a bit below it then the dividend would have been aorund 3%.  Since the dividend was paid the Ask has briefly dropped a few times below the 0.0074 wall as people selling post-dividend put their Asks up, but those have been tending to get cleared fairly promptly.  The actual wall at .0074 is down to 177k.  A few days ago there were 400k shares in it - and it was at 200k earlier today.  My expectation is that wall will go this week and the price will move up a bit over 1% to the next wall (of 460k shares) at .0075.

I'd be very surprised if the price of S.DICE falls for any period of time in the near future.  It WILL probably dip on occasions - the bid side is always weak on MPEx - but has been recovering very quickly whenever it gets sold down (last week at one point the bid side got cleared down to .0038 - but was back up over .007 within an hour).  It remains a solid investment - whether the price will go significantly higher is open for debate: I wouldn't be surprised if it manages to (at least temporarily) get up to the big walls at .01 but nor would I be surprised if it stays in the mid .0007xs for the next month.

Do remember that both S.DICE and S.BBET are denominated in BTC.  If you believe LTC will rise vs BTC in the short-term then you should probably consider selling S.DICE now and buying back in after LTC has risen however far it is you think it will rise.  Remember that if there's no competetive bid up and you want to sell either pass-through you can put up an Ask - and if I can sell on MPEx and convert at Ask on BTC-E with a 2.5% markup then I'll fill your Ask for you and sell the shares off on MPEx (or keep them).  There's no need to sell at a huge loss compared to the MPEx Ask (at least not on S.DICE where theres usually some Bids not too far below the Ask).

I was going to discuss some other things - but will deal with those later in the week as this post is long enough already.

Management fee is 6 units (rounded down from 6.15) which will be transferred shortly.
Bid is up at 34.5.