FAQ announcement:
https://bitcointalk.org/index.php?topic=81993.msg1233186#msg1233186-----
1. [TradeFortress]: usagi, I would like to invest in BMF however I'm a bit concerned with the inconsistent dividends (0.001 for a few weeks).. what happened there?Those were daily dividends which we did as a promotion when we launched BMF. They totalled about 1.5% a week, maybe 2% a week. When the price crash happened, I panicked and launched
motion 80. Note that this motion allowed me to cancel dividends temporarily. I am still, actually, covered by motion 80 and don't have to pay dividends or invest in new hardware. But it turns out this part of the decision killed sales of BMF. No one wanted to invest in a fund that didn't pay dividends. So I experimented with paying various levels of dividends. Investors seem to like daily dividends the best, so here we are, I am paying daily dividends on BMF for at least another 2 weeks. You see I really want to make BMF the best. I have a dream -- I know it sounds corny but I want to run BMF as a company. I want to have an office and a telephone number and a back room with 50 SC singles in it. I know that perhaps I have not always properly communicated with investors and I have assumed that everyone would read the motions, but there it is. If you look at the other things that motion 80 said I think you will realize I want to treat this company like my baby. All I wanted to do was fix investor's loss. I think that going forward, daily dividends, followed by mass hardware purchases (and 0.5%/week divs), will do that.
Essentially, at the start of the week, when BMF is worth say .49, then we make money from our holdings and from our mining operations. Then at the end of the week we're actually worth .51 or .52 -- but then we pay dividends. So we drop back down to .49. If we didn't pay dividends, we would grow the value of the company faster, through acquisitions and hardware purchases. In the future, I'll continue to keep investors informed well in advance of any changes to dividend payment and growth policy, but for now we're paying daily dividends of around 1.5% per week. You can check this on stochastically.com. Thanks for your question.
2) [puppet] Question: Even using your method, it is not difficult to see that your 'real' values are almost always quite above market price (ex. current GIGAMINING price is
5 day average 0.578 | 24h average 0.553 | 'real' value 0.63) do you think the market is really this wrong? And even if it was, don't you think it is quite misleading? How can a share be worth more than X bitcoins, if that much bitcoins could get you one now? Funny is, I was about to include a question about the value of mining gear, but writing question #2 I realized you are actually right about them
The value should be counted as the price you would pay for them, shipping included; as this is what counts in buying your shares vs. buying the gear and mining directly. As long as that value is less than what you will earn from them, of course, but then if that was the case it wouldn't make sense to buy them in the first place.
Answer: Valuing securities and hardware is an exceedingly complex topic. One cannot just take the spot price or the NAV and say that is the value of a security. You almost answered this yourself with the comment on hardware; If we sell 120 shares at .50 and buy a FPGA single, we have to pay shipping. Now say we were totally honest about the "value" of the company. We could no longer sell shares at .50. This is called cash-basis accounting, and most companies do not use cash basis accounting for this reason. Another kind of accounting is called accrual basis accounting. In accrual basis accounting, which we also use for hardware orders, we count orders made as value even though we do not actually have the units in our possession. For exmaple, BMF has a market cap of about 2,400 bitcoins and about 4,800 outstanding shares (share price ~.50). But we have 343 bitcoins worth of hardware on order. If we tried to value our company as if we didn't actually own those singles, we'd be forced to sell shares at about .42. That wouldn't make sense. So we use accrual accounting for hardware purchases. Yet another form of accounting is called cost-basis accounting, in which the total cost of the asset is counted. This is a common form of accounting as well. You touch on cost-basis accounting when you say "...but writing question #2 I realized you are actually right...," again, if we simply say that a FPGA single we order is worth 50 bitcoins (and not say 62.6699), the value of our shares will drop and this is not logical. This equipment is not like a car or a computer that loses value as soon as you pay for it. In fact, the resale value of FPGA singles is actually much higher than $599. BMF could make money selling these for $799 and they would sell like hotcakes. Why don't we do this? Well, we could. But the point is, that using cost-basis accounting, accrual-basis accounting, and cash-basis accounting in the right places, for what they are intended to be used for, makes sense.
Valuing an asset such as ABM, FPGAMINING, GIGAMINING, BTC-MINING, etc. is even more complex. In many cases we have a list of hardware that the company has. However some companies, like ABM, give investors a share of this hardware, while other companies, like GIGAMINING, do not give investors a share of the hardware. Therefore, 1mhash in GIGAMINING might only be worth .1 per share (and GIGAMINING would be .5/share), but since ABM has the value of a single attached to all it's shares it would be worth the .1/share plus $599+shipping (i.e. ~62.6699 using accrual value accounting) split up amongst 1000 shares. So that will add 0.063 per share, and we might say ABM is worth about .18 per share even though on a mhash by mhash basis it pays out as much as GIGAMINING. There are other factors to consider. Using ABM as an example, it's a company which can accrue value. If PsychoticBoy decides to issue 1000 shares to buy more hardware and he issues at .18, he can buy about 3 more FPGA singles based on the value of his company. So one share of ABM would then double in intrinsic value, but the market would likely price it around the same as it's priced now.
One might point out that the value of the mhash/share is contained in the value of the singles; This is both true and not true depending on the nature of the company or bond in question. In GIGAMINING's case, it is not true; you have no claim to hardware with GIGAMINING, yet the shares are actually worth more than .1/share. What's going on here is that companies are also valued by the income they generate. This is called a P/E (price to earnings) valuation. Right now, P/E values in bitcoin land are completely insane. BMF makes over 2% a week. Were we to give BMF a P/E ratio based on payments of .01 a week and a share price value of .50, we would say BMF has a P/E value less than one; i.e. 0.50 / 0.52 = ~0.96. Real-world companies often have P/E ratios over 10. Many real-world mining companies (coal, natural gas, gold and silver mining companies) have P/E ratios around 50. A P/E of less than one is considered less than liquidation value. Going by income alone, if BMF was a real world company and we valued it's income at 1% a month, which is really the maximum, say for something like a well-run covered call fund or a REIT, then BMF would pay around 1% a month and have a P/E of about 8.5. Even at half this valuation BMF should be worth over 2 bitcoins/share with the income it generates right now. This is using real-world thinking and real-world metrics.
So how do we value a company that generates 0.01 a week per share and costs .35 bitcoins? Do we value it at it's liquidation price? No. At the same time, valuing it with a P/E of 10 might be disingenuos. Do we really know so much about this company to assign it that kind of respect? Maybe no. Most companies on the market now have P/E ratings of about 1. We feel that in general this is accurate. However in some cases, such as comparing ABM to GIGAMINING, or say comparing BTC-MINING to YABMC, we feel that in general, the following is worth more:
companies are to be valued more highly than
bonds,
stable dividends (cash flow is king, not just cash) are worth more than a sizeable
growth fund (esp. in a bear market), and a company which is
growing is worth more than a company which is
not growing. I have tended to be extremely conservative in my valuations and you will find if you look closely we do not always overvalue securities. Although it will of course change from day to day, here are a few current examples:
We currently value JAH at a RMV of 0.125 (spot price using formula is 0.13)
We currently value ABM at a RMV of 0.31 (spot price using formula is 0.35)
We currently value LTC-MINING at a RMV of 0.55 (spot price using formula is 0.57)
We currently value BIF.5-10.MININGBOND at a RMV of 0.75 (spot price using formula is 0.79)
We currently value ZETA-MINING at a RMV of 0.17 (spot price using formula is 0.1777)
In short, using RMV represents our mandate, contained in our contract: The fund is mandated to only invest in bitcoin mining companies listed on the GLBSE
and to perform due dilligence when investing in securities on the GLBSE. Emphasis mine. If we did not think carefully about the true value behind a company, and just let the spot price rule the day, we could not make investment decisions based on due dilligence. We feel that the RMV is a large part of the added value BMF provides to it's shareholders and indeed the general market. When you see a large difference, like how we value NASTY at .6 while the market price is only 0.35, you can bet our RMV has been backed up by talking to the asset issuer, investigating the company, looking at the hardware they own and their expansion plans, and so forth. As an example, in NASTY's particular case (because the RMV is so far above the market price) we would justify it by repeating what we said about the operator considering selling hardware to buy back shares. Further, OgNasty has the lowest order number for SC singles and will receive the first 6 such singles shipped by BFL. Overall we just feel NASTY (for example) is worth it. Whew, long answer, but it is important that investors are aware of what we mean when we say "our mandate is to do due dilligence". We really mean that. We're not just an index fund.
3) [Deprived] Questions about BMF's insurance policy with CPA. One, is BMF entitled to claim under that policy now (and previously) with it's NAV/share being under 1.0? If "Yes" then why hasn't it? Second, on September 10th in regards to the policy you said "This was announced, publicized, motioned, voted on and passed two months ago." Where was it announced and publicised? Where can I find the motion?. Where can I see the results of the voting?
Answer: The motion and the vote were in regards to other issues, as can be seen by looking up your quote. The announcement and publishing was done on the day I put the contract up as shown below in the links provided. Why not? There's nothing bad in the contract.
the contract is at
http://www.tsukino.ca/cpa/customers/account-12/the announcement is at
https://bitcointalk.org/index.php?topic=81993.msg1070515#msg1070515Actually there were a few announcements in different places on the forums, I don't really have time to go dig up each and every single reference. That one was on August 2nd. Everyone saw it. No one said anything until you and a few others tried to make it into something nefarious. It's not. It's just a contract for BMF. I was working on what would eventually become the CPA shareholder protection contract. The reason why BMF has not requested any money is simply because I'm confident I can repair the value of BMF by itself within a few more months. Plus, CPA is having obvious financial problems, people have defaulted on us for over 1,500 (hashking alone was 527BTC). We have enough to pay out on the contracts we have because we were careful and smart (a lot smarter and careful than you give us credit for, more than you will ever know probably).. But CPA can't sign any new contracts. So there it sits, in limbo, likely until the middle of next year. FWIW BMF is not paying 5 BTC a week to CPA right now.
