[Havelock][KCIM] Korb Investments – Establishing my Investment Firm, part 1

[acorcos]

Hey Korbman,

Any updates? Seems you've had an uptick in deposits to your mining income wallet since the 19th. Is that just the one BFL single?

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[Korbman]

Hey Korbman,

Any updates? Seems you've had an uptick in deposits to your mining income wallet since the 19th. Is that just the one BFL single?

Hi Acorcos,

I wish we could pull in that much off just one Single!

We've been mining at full speed with all received equipment since October 12th (since that's when I got the Jupiter up and running properly). The deposits are larger since I readjusted how often pool payouts are made. It was set to a limit of 1.0 BTC on Gigavps's pool, but has been readjusted to 0.5 since then (hence the change starting around 22nd/23rd). Prior to last week, we were pointed to BitMinter and a 0.1 BTC payout threshold, which happened numerous times per day.


And while we're on the subject, mining revenue will continue its bi-weekly move to the Fund wallet for Note repurchasing...and I'm sure there are a number of you who are happy to finally see some action on their Havelock account. All that's left at this point is to push forward and hope January (and CoinTerra) brings some better news.

[norman]

Uut of curiosity, why did you decide to do repurchasing the way you are doing it rather than repurchasing at discount from the open exchange orders?  Wouldn't everyone benefit most by clearing the maximum number of outstanding shares possible?  Why take N shares off the market when you can take 3N or 4N shares off the market providing increase value to everyone? 

I'm not complaining.  I'm just curious what the thinking is.

[Korbman]

Uut of curiosity, why did you decide to do repurchasing the way you are doing it rather than repurchasing at discount from the open exchange orders?  Wouldn't everyone benefit most by clearing the maximum number of outstanding shares possible?  Why take N shares off the market when you can take 3N or 4N shares off the market providing increase value to everyone? 

I'm not complaining.  I'm just curious what the thinking is.

It's a good question, and one I often rethink since there are quite a few ways that repurchasing can happen.

As everyone knows, the original set of contracts had to be voided in order to completely overhaul the way the repurchasing occurred (otherwise insolvency would have ensued)...but I truly wanted to keep to some semblance to what I had originally thought out. Add in the fact that most people purchased during the 2012 IPO at BTC1.0 and it made sense to try and stay above that. That's where the notion to buyback at the "minimum" of BTC1.005 per Note came into play.

But is BTC1.005 a good number to work with? I'm not entirely sure. It certainly has its benefits for those who are seeing some of their Notes bought back every 2 weeks. If I switch to a repayment of BTC0.5, I'll then be able to buy back twice the amount during that same period...but I'd wager that investors wouldn't be happy with that decision since the majority bought in at BTC1.0, even if it meant more people saw the benefits.

I've been trying to strike a balance between keeping to my word and being practical, though it's certainly easier said than done. I'm more than happy to look into another method if someone has an idea, just let me know. 

Does that help?

[ar9]

Some lucky ****er got 4 @ 0.001 today! 

[norman]

I've been trying to strike a balance between keeping to my word and being practical, though it's certainly easier said than done. I'm more than happy to look into another method if someone has an idea, just let me know. 

Thanks.  I was just curious.   Perhaps there should be some threshold whereby you prefer repurchasing shares from the exchange at a discount?  I'd rather see each 1 BTC go towards buying back 3 or 4 shares than 1 share.  That increases everyone's expectations in the long run.  But, that may simply not be possible due to commitments you've already made.

[supermono]

I've been trying to strike a balance between keeping to my word and being practical, though it's certainly easier said than done. I'm more than happy to look into another method if someone has an idea, just let me know. 

Thanks.  I was just curious.   Perhaps there should be some threshold whereby you prefer repurchasing shares from the exchange at a discount?  I'd rather see each 1 BTC go towards buying back 3 or 4 shares than 1 share.  That increases everyone's expectations in the long run.  But, that may simply not be possible due to commitments you've already made.

I prefer the current system. I only have 1 share, which I bought for 1 BTC on November 1, 2012. After Korbman's announcement of the financial problem, I chose to hold on to my share rather than listing it for sale at a steep discount, because I believe that if I am patient sooner or later (hopefully sooner) Korbman will be buying back my share for the 1.005 BTC price, which is what is specified in the original contract. If he starts using his limited incoming BTC to buy from the market at 0.001 etc. prices, what incentive does he have to fulfill his original commitment to repurchase the shares at 1.005? In that case he's going to feel a temptation to stop or delay the buyback so that people will get frustrated and list their shares on the market at a steep loss. (I'm not implying that Korbman would do this, just that the temptation would be there, and that it's a situation that no issuer should be put in.) I strongly believe that in order to avoid potential conflicts of interest, Korbman should not be buying shares on the open market at this time. If people want to sell their shares for 0.001 or other discounted prices, they can do that already without needing Korbman anyway. I for one, after seeing the lucky person who picked up several shares at 0.001, have already put in a bid to buy a few at that price. So anyone who wants to sell their shares for 0.001 each can sell them to me. 

[acorcos]

Uut of curiosity, why did you decide to do repurchasing the way you are doing it rather than repurchasing at discount from the open exchange orders?  Wouldn't everyone benefit most by clearing the maximum number of outstanding shares possible?  Why take N shares off the market when you can take 3N or 4N shares off the market providing increase value to everyone? 

I'm not complaining.  I'm just curious what the thinking is.

It's a good question, and one I often rethink since there are quite a few ways that repurchasing can happen.

As everyone knows, the original set of contracts had to be voided in order to completely overhaul the way the repurchasing occurred (otherwise insolvency would have ensued)...but I truly wanted to keep to some semblance to what I had originally thought out. Add in the fact that most people purchased during the 2012 IPO at BTC1.0 and it made sense to try and stay above that. That's where the notion to buyback at the "minimum" of BTC1.005 per Note came into play.

But is BTC1.005 a good number to work with? I'm not entirely sure. It certainly has its benefits for those who are seeing some of their Notes bought back every 2 weeks. If I switch to a repayment of BTC0.5, I'll then be able to buy back twice the amount during that same period...but I'd wager that investors wouldn't be happy with that decision since the majority bought in at BTC1.0, even if it meant more people saw the benefits.

I've been trying to strike a balance between keeping to my word and being practical, though it's certainly easier said than done. I'm more than happy to look into another method if someone has an idea, just let me know. 

Does that help?

Keep to your plan Korbman. Those of us who have been with you the longest and have the most invested deserve priority on the buybacks. This is not a lottery. You offered bonds and we appreciate your attempts to be equitable in making you investors whole. If you start buying on the market you are rewarding those who came in late, at a discount who are trying to flip their shares. If whoever bought 4 at .001 sold today at .34 to an uniformed investor - god bless. But if it was you, that sucks for rest of us.

All the rest of you, read the previous posts. This has all come up before.

[Korbman]

I apologize for the delay as I was travelling yesterday.

If he starts using his limited incoming BTC to buy from the market at 0.001 etc. prices, what incentive does he have to fulfill his original commitment to repurchase the shares at 1.005? In that case he's going to feel a temptation to stop or delay the buyback so that people will get frustrated and list their shares on the market at a steep loss. (I'm not implying that Korbman would do this, just that the temptation would be there, and that it's a situation that no issuer should be put in.) I strongly believe that in order to avoid potential conflicts of interest, Korbman should not be buying shares on the open market at this time.

You are 100% correct, which is why I've felt it to be unethical to repurchase directly off the market. Not to mention my purchase of Notes off the market doesn't really solve the problem, since technically the Notes are still outstanding (just changing holders), and that doesn't help the overall fund situation. It makes much more sense to focus on the underlying operations (mining, covering expenses, paying debts, etc) than to try and manipulate the market.

[acorcos]

Hello Korbman,

Would you consider restructuring your debt? Our situation is essentially one of a debt crisis, and in a debt crisis, both debtors and creditors bear responsibility; if you borrowed too much, we lent too much and we are all victims of unforeseen externalities. Swapping debt for equity would align our interests. Take your bonds off the market, use an equitable formula to re-assign shares based on amount invested (I assume between you and Havelock this should be possible, and I don't mean 1 note = 1 btc), and start paying out profits weekly or monthly. I know it sounds a bit chapter 11, but think of it more as a sovereign debt restructuring (ie Argentina 2002). We become partners for as long as we can keep mining. What do think?

[Korbman]

Swapping debt for equity would align our interests. Take your bonds off the market, use an equitable formula to re-assign shares based on amount invested (I assume between you and Havelock this should be possible, and I don't mean 1 note = 1 btc), and start paying out profits weekly or monthly. I know it sounds a bit chapter 11, but think of it more as a sovereign debt restructuring (ie Argentina 2002). We become partners for as long as we can keep mining. What do think?

Debt restructuring is a good idea, though I don't have anything formally prepared to proceed with it. If the second phase of my company was implemented, a debt-equity swap would certainly be feasible since I'd have stock to offer up in replacement of the Notes.

The Notes themselves were technically taken off the market back in March, though I presume you mean halting trading as well. This was something I considered back in October prior to the first round of repurchasing, but I decided against it because I didn't want to limit anyone from selling their holdings if they needed money, just wanted to trade, or simply wanted out (and if there are sellers, there are buyers)...and with the current exchange turmoil and price volatility, a trading limitation may not be the fairest option.

In any case, you've got me thinking. There many be an option here we're not seeing, or at the very least I should be able to find some middle ground. Thanks!

[norman]

All the rest of you, read the previous posts. This has all come up before.

Sorry.  I didn't see it really discussed much prior.  I'm not an original investor, and my stake is very small.  I still don't understand how anyone could support using 1 BTC to buy out 1 share when it could buy out 3 shares, unless they were blinded by greed under the expectation that they will collect 1 BTC at the expense of all the other investors.

But, as I said, I have little skin in this game.  I was just trying to understand the thought process.  Fortunately the Havelock market while weak, still exists, and I can exit my position at any point with relatively little loss.  That's something many of you guys can't say, so I really can't criticize too much. 

[supermono]

Sorry.  I didn't see it really discussed much prior.  I'm not an original investor, and my stake is very small.  I still don't understand how anyone could support using 1 BTC to buy out 1 share when it could buy out 3 shares, unless they were blinded by greed under the expectation that they will collect 1 BTC at the expense of all the other investors.

But, as I said, I have little skin in this game.  I was just trying to understand the thought process.  Fortunately the Havelock market while weak, still exists, and I can exit my position at any point with relatively little loss.  That's something many of you guys can't say, so I really can't criticize too much. 

Norman,

I'm not sure when you purchased your share(s) and at what price. But when I bought my share in November 2012, I bought it from the issuer in the IPO, at the full price of 1 BTC, based on the description of the asset in the contract as a bond paying 0.5% per month, with a buyback price of 1.005 BTC. People who bought in the IPO who are supporting the buyback price of 1.005 BTC are not "being greedy at the expense of other investors"; they are just supporting the original contract. (Although admittedly part of it could be that it is a little hard for us to face up to the reality that the investment is turning out differently than we hoped/expected one year ago when we invested in it, and Korbman's approach at least allows us to have a chance at still getting back the originally promised return.)

That said, based on what Korbman said, due to the extreme delay in getting the mining equipment, it sounds like the mining is unlikely to generate enough income to fully buy back all shares. Korbman is currently addressing this through the random buybacks, meaning that some shares will be bought back in full per the terms in the original contract, whereas other shares are likely to never be bought back by the time the mining becomes unprofitable and has to be shut down.

I do think Acorcos' proposal is an alternative that should be seriously considered. If the asset were restructured from a bond to a revenue share, each share of the old bond could be equal to one share in the new revenue share. As Korbman got mining income, he could distribute the income evenly over all shares as dividends, and could continue to do this until the mining no longer was profitable, at which point he would need to sell off the equipment and distribute a final dividend. I'm guessing that for people with hundreds of shares, the revenue share and the old bond model with random buybacks would probably generate similar results. But for people like me (1 share) or you (apparently a small number of shares too), it would be a way we could be sure to get some return on our investment, rather than all or nothing like under the current system. I think this is worth serious consideration. However, it does make me nervous when issuers make changes to a contract (although I suppose making the buybacks random was already a change from the original contract anyway). If BTCT.CO still existed, and KCIM were on that platform, I would suggest that the issuer present the issue to shareholders for a vote on a possible switch to a revenue sharing model. But as far as I know, Havelock does not have a voting feature. But if an issuer and users request it, maybe they would be willing to add this feature?

Whatever Korbman decides to do in terms of the buyback, users who have an urgent need for BTC (or who see an opportunity to sell at what they consider a good price) should always be able to sell their shares on the market. So my thoughts about the asset are less from a point of view of liquidity and being able to get out of my investment if I need to, and more from a perspective of how Korbman might feasibly be able to wrap up the asset while avoiding potential conflicts of interest and without unilaterally setting the contract completely aside. 

[acorcos]

Thanks for the endorsement supermono.

Actually the terms of the original contract were not what is currently stated on the overview at Havelock. Originally:

Each Note will have a Coupon Rate of 1% per month until June 2013, during which the rate will increase to 2%, until January 2014 when it goes to 4%. In April 2014, the Rate will increase one last time to 6% to pay back the final Note holders.

The starting buyback price will be 1.10BTC for the first 6 months (June - December 2013), 1.15BTC for 3 months (January 2014 - March 2014), and 1.20BTC for the last month of April. This would mean a 17 month holding (November 1st, 2012 to April 30th, 2014). The largest Note Holders will receive the most return on investment as their holdings will last the longest.

So the terms were quite appealing and the intention was always to reward the longest note holders. Clearly, everything changed.

Also, even though Havelock does not have a mechanism for shareholder voting, Korbman has made changes to the contract that he has presented to the shareholders on this forum for a vote, so something similar could occur again.

Finally, trading continues currently on what amounts to a secondary market that really only benefits new players. Again, someone bought 4 shares at .001 and sold them at .04, or .09 (minimum), possibly higher; either way, not a bad return. But none of the long term, original investors are participating in trading at this level, it wouldn't make sense. So we just hold onto our shares in hopes of hitting the lottery every two weeks.

There is no reason trading can't re-open after restructuring, allowing individuals to exit or buy in but I really think an equity swap is the fairest thing at this point.

[supermono]

Thanks for the endorsement supermono.

Actually the terms of the original contract were not what is currently stated on the overview at Havelock. Originally:

Each Note will have a Coupon Rate of 1% per month until June 2013, during which the rate will increase to 2%, until January 2014 when it goes to 4%. In April 2014, the Rate will increase one last time to 6% to pay back the final Note holders.

The starting buyback price will be 1.10BTC for the first 6 months (June - December 2013), 1.15BTC for 3 months (January 2014 - March 2014), and 1.20BTC for the last month of April. This would mean a 17 month holding (November 1st, 2012 to April 30th, 2014). The largest Note Holders will receive the most return on investment as their holdings will last the longest.

So the terms were quite appealing and the intention was always to reward the longest note holders. Clearly, everything changed.

Also, even though Havelock does not have a mechanism for shareholder voting, Korbman has made changes to the contract that he has presented to the shareholders on this forum for a vote, so something similar could occur again.

Finally, trading continues currently on what amounts to a secondary market that really only benefits new players. Again, someone bought 4 shares at .001 and sold them at .04, or .09 (minimum), possibly higher; either way, not a bad return. But none of the long term, original investors are participating in trading at this level, it wouldn't make sense. So we just hold onto our shares in hopes of hitting the lottery every two weeks.

There is no reason trading can't re-open after restructuring, allowing individuals to exit or buy in but I really think an equity swap is the fairest thing at this point.

Thanks for the correction on the original contract terms acorcos. I hadn't saved a copy of the original contract--I remembered that the terms were very attractive, but I had forgotten quite how good they were. With everything investors in BTC securities have been through the last few months (decline of mining assets in August, shutdown of BTCT/LCG in September, BitFunder in October, Coinlenders "hacking" and closure of XBOND in November, etc.), the market has been transformed so much that one year ago seems like ancient history now. 

[acorcos]

[quote author=supermono link=topic=119628.msg3740861#msg3740861 date=1385580298

With everything investors in BTC securities have been through the last few months (decline of mining assets in August, shutdown of BTCT/LCG in September, BitFunder in October, Coinlenders "hacking" and closure of XBOND in November, etc.), the market has been transformed so much that one year ago seems like ancient history now. 
[/quote]

Ain't that the truth!!

Didn't even know about XBOND. Glad I got out of that rascal.

Certainly, we're in unchartered waters.

[supermono]

Didn't even know about XBOND. Glad I got out of that rascal.

Certainly, we're in unchartered waters.

XBOND was a well-run bond, and it was bought back at 105% of its face value per its contract. So people who were holding it when it was bought back came out of it fine, as long as they had not paid over 105% of face value when they bought it. I'm guessing the reason the issuer chose to do a buyback is probably because the way the market has crashed, the 18.25% annual rate it was paying has gone from being at the market rate or a little below market (compared to LTC-ATF.B1 at 31.2%, Coinlenders which started out in the 30's and ended up in the 20's, and LTC-ATF.B2, Graet.Loan, and Ukyo.Loan at 18.25%, all of which have closed or stopped paying within the last two months), to being what I would consider above market rates in the new market reality. Plus if TAT's goal was to invest the money received in other higher-paying investments, I'm guessing he'd have a hard time nowadays finding reliable investments paying a return higher than what his own bonds were offering. I do hope TAT chooses to offer another bond, though, even if it's at a slightly lower interest rate.

[norman]

If you start buying on the market you are rewarding those who came in late, at a discount who are trying to flip their shares. If whoever bought 4 at .001 sold today at .34 to an uniformed investor - god bless. But if it was you, that sucks for rest of us.

I don't see why you think you deserve special treatment over the person who got a share for .001.  A share is a share.  It doesn't suddenly become worth less because it was traded.  I wasn't under the impression that this is a pyramid scheme where people at the top get all the rewards where people at the bottom are left with nothing.

Are these bonds numbered and prioritized?  How do you know where you sit in the queue?  If you have a high priority share and trade it, does it move to the back of the line?   What's the point of even allowing shares to transfer hands if they suddenly become worth nothing?

[Dargumin]

If you start buying on the market you are rewarding those who came in late, at a discount who are trying to flip their shares. If whoever bought 4 at .001 sold today at .34 to an uniformed investor - god bless. But if it was you, that sucks for rest of us.

I don't see why you think you deserve special treatment over the person who got a share for .001.  A share is a share.  It doesn't suddenly become worth less because it was traded.  I wasn't under the impression that this is a pyramid scheme where people at the top get all the rewards where people at the bottom are left with nothing.

Are these bonds numbered and prioritized?  How do you know where you sit in the queue?  If you have a high priority share and trade it, does it move to the back of the line?   What's the point of even allowing shares to transfer hands if they suddenly become worth nothing?

This.

[supermono]

Are these bonds numbered and prioritized?  How do you know where you sit in the queue?  If you have a high priority share and trade it, does it move to the back of the line?   

I don't understand this well either. This is one reason why I like acorcos' idea to convert the asset into a revenue share, and pay dividends from the mining revenue equally distributed over all outstanding shares, for as long as the mining remains profitable, and then liquidate and pay a final dividend when the mining is no longer profitable. That way, all the shares would be treated equally, and everyone would get part of their investment back (the person who bought 4 shares at 0.001 would likely come out way ahead ). With the current system of the buybacks, besides it not being clear how Korbman selects which shares will be repurchased, no matter what price Korbman chooses to buy back at, somebody is going to be unhappy: if he chooses a buyback price of less than 1 BTC, all of us who purchased at the IPO for 1 BTC will be kicking ourselves for not simply having held on to our BTC. If he chooses a buyback price of 1 BTC or higher, the people who bought later at a discount may prefer a lower buyback price, so they can have a higher chance of their share getting bought back. (Of course, if he buys back at 1 BTC, and you bought 4 discounted shares at 0.25 each, then if he buys back just one of your four shares, you've broken even, and if he buys back two or more, then you're ahead.) The revenue share idea nicely bypasses both of the thorny issues of whose shares will be bought back, and at what price.