[Closed] G.MPOE Pass Through

[DeaDTerra]

Hi guys
Thought I would start a thread regarding my asset om BitFunder G.MPOE (https://bitfunder.com/asset/G.MPOE).
It's another pass through to MPEX same idea as for the S.DICE pass through but this time for S.MPOE.


Do you want to invest in S.MPOE without having to go through the trouble of setting up a account on MPex?
Or maybe you want to avoid paying a 30 BTC fee for account creation?
Then look no further! G.MPOE is a perfect way to invest in S.MPOE through BitFunder without the trouble and all of the gain

Contract:
Each share has the right to 95% of the dividends paid by S.MPOE listed on MPex (http://mpex.co/?mpsic=S.MPOE).
Each G.MPOE is backed up by one share of S.MPOE share.
The dividend will be paid within 48 hours of the payment from S.MPOE. If this is not possible then the dividend will be paid out altogether with the next dividend.
The issuer has the right to issue more shares and buy back shares (at the value of 1 S.MPOE share on MPex). The shares have no voting rights.
In case of MPEX shut down or hacking the issuer is not responsible for potential losses or damages cause to the underlying backing

If you have any questions please do ask.
//DeaDTerra

[DeaDTerra]

A wall of 100k Shares is up at 0.000665 BTC per share
//DeaDTerra

[wisard]

The issuer has the right to issue more shares and buy back shares (at the value of 1 S.MPOE share on MPex). The shares have no voting rights.

This doesn't sound fair.

Issuing more shares without early announcement affects the ability of existing share holders to sell their stake if they want to.

And if we go by Satoshi Dice pass through on bitfunder, we know that bitfunder prices are always more than MPex prices - because of the 30 bitcoin MPex fee. Existing share holders can be screwed any time you see a good arbitrage opportunity. If you want to buy back shares, buy them back from the bitfunder market at the valuations the market decides. You shouldn't have the right to buy back shares from Bitfunder pass through share holders based on the price and valuations on the MPex market.

[wisard]

A wall of 100k Shares is up at 0.000665 BTC per share
//DeaDTerra

https://bitfunder.com/asset/G.MPOE#pane_tradehistory
The Trade History shows that less than 78,000 shares were listed sold at 0.000665.
Not 100K.

Maybe 22,000 shares were withdrawn?

[🏰 TradeFortress 🏰]

The issuer has the right to issue more shares and buy back shares (at the value of 1 S.MPOE share on MPex). The shares have no voting rights.

This doesn't sound fair.

Issuing more shares without early announcement affects the ability of existing share holders to sell their stake if they want to.

And if we go by Satoshi Dice pass through on bitfunder, we know that bitfunder prices are always more than MPex prices - because of the 30 bitcoin MPex fee. Existing share holders can be screwed any time you see a good arbitrage opportunity. If you want to buy back shares, buy them back from the bitfunder market at the valuations the market decides. You shouldn't have the right to buy back shares from Bitfunder pass through share holders based on the price and valuations on the MPex market.

Each share is (supposed to) be backed with 1 MPOE share, so I don't really see the problem of issuing more shares if DeadTerra isn't naked short selling. I don't like the ability to buy back shares @ MPEX prices, but it's the same for his other passthroughs. I also bet that some of the forum members here are going to accuse DT of scamming them if DT uses this portion in the contract that they didn't read 

[wisard]

Each share is (supposed to) be backed with 1 MPOE share, so I don't really see the problem of issuing more shares if DeadTerra isn't naked short selling

The issue is each pass through share is usually priced at a premium than the MPex rate. I buy them at a premium. If new shares are issued at the MPex rate, it definitely affects my ability to sell my stake. I have to either sell at a lower rate, or wait and pray that the new shares issued doesn't satisfy the market demand.

All new share issues should have prior warnings.

[🏰 TradeFortress 🏰]

Each share is (supposed to) be backed with 1 MPOE share, so I don't really see the problem of issuing more shares if DeadTerra isn't naked short selling

The issue is each pass through share is usually priced at a premium than the MPex rate. I buy them at a premium. If new shares are issued at the MPex rate, it definitely affects my ability to sell my stake. I have to either sell at a lower rate, or wait and pray that the new shares issued doesn't satisfy the market demand.

All new share issues should have prior warnings.

If new shares are issued at the MPex rate, then you could buy that and not pay it at a premium. Obviously there's a risk with paying more than MPex price. 

[wisard]

If new shares are issued at the MPex rate, then you could buy that and not pay it at a premium.

Obviously there's a risk with paying more than MPex price.

I understand. I am willing to take the risk of paying more than the MPex price as well as get only 95% of the dividends for 2 reasons:
i. Save on the MPex fee of 30 bitcoins
ii. Have liquidity in the market - allowing me to sell the shares at a price higher than I would be able to at MPex.

But by issuing new shares and flooding the market, I get affected if I want to sell my shares. It completely negates the second reason people pay a premium for for pass through shares.

I'm happy if I want to buy them, but not if I want to sell.
That is why, any manipulation of supply and demand should require prior warning.

[DeaDTerra]

The issuer has the right to issue more shares and buy back shares (at the value of 1 S.MPOE share on MPex). The shares have no voting rights.

This doesn't sound fair.

Issuing more shares without early announcement affects the ability of existing share holders to sell their stake if they want to.

And if we go by Satoshi Dice pass through on bitfunder, we know that bitfunder prices are always more than MPex prices - because of the 30 bitcoin MPex fee. Existing share holders can be screwed any time you see a good arbitrage opportunity. If you want to buy back shares, buy them back from the bitfunder market at the valuations the market decides. You shouldn't have the right to buy back shares from Bitfunder pass through share holders based on the price and valuations on the MPex market.

While it might effect the short term liquidity of the market it has no long term effect of introducing more shares as the backing or underlying asset of is share is exactly the same independent of how many shares I issue.
Arbitrage is a healthy thing for the market it brings down the spread and it's part of the free market hence I encourage it. I arbitrage when I see that the spreads are great and hence causes problems for people who want to sell/buy the shares.
The reason why I have this clause is in the case where I want to back up my bags and shut down the pass through, Please look through my past. I do not misuse my contracts for personal gain.

A wall of 100k Shares is up at 0.000665 BTC per share
//DeaDTerra

https://bitfunder.com/asset/G.MPOE#pane_tradehistory
The Trade History shows that less than 78,000 shares were listed sold at 0.000665.
Not 100K.

Maybe 22,000 shares were withdrawn?

I decided to take away 22k as they were selling faster then I could keep up with, hence I was starting to have naked sales.
Hence I took the offer down and I now have a new offer which is completely backed

Each share is (supposed to) be backed with 1 MPOE share, so I don't really see the problem of issuing more shares if DeadTerra isn't naked short selling

The issue is each pass through share is usually priced at a premium than the MPex rate. I buy them at a premium. If new shares are issued at the MPex rate, it definitely affects my ability to sell my stake. I have to either sell at a lower rate, or wait and pray that the new shares issued doesn't satisfy the market demand.

All new share issues should have prior warnings.

If new shares are issued at the MPex rate, then you could buy that and not pay it at a premium. Obviously there's a risk with paying more than MPex price. 

This is some of the arguments which were used against Erik when he issued more shares, You are arguieing out of a speculation point of view, this is not investing but gambling. For a investor the short term market price should not matter other then as a way to buy or sell at that price, as long as the underlying assets are the same a investor should not see a problem with issuing more shares.
But as said previously I am not looking to abuse the contract and manipulate the market, it's simply for my own comfort which I have the clause of that I can issue shares as I would like.
I will try to post when I issue more shares but this is not something I can promise.

If new shares are issued at the MPex rate, then you could buy that and not pay it at a premium.

Obviously there's a risk with paying more than MPex price.

I understand. I am willing to take the risk of paying more than the MPex price as well as get only 95% of the dividends for 2 reasons:
i. Save on the MPex fee of 30 bitcoins
ii. Have liquidity in the market - allowing me to sell the shares at a price higher than I would be able to at MPex.

But by issuing new shares and flooding the market, I get affected if I want to sell my shares. It completely negates the second reason people pay a premium for for pass through shares.

I'm happy if I want to buy them, but not if I want to sell.
That is why, any manipulation of supply and demand should require prior warning.

People should not pay extra for shares if their reason is that they believe that they maintain this higher value in the future, that's speculation once again and someone who speculatates short term must understand the risk they are taking. I can not control the market, nor will I try to. I will issue shares when I can and I feel like issuing more shares, but I will not use it as a means to manipulate the market.
//DeaDTerra

[DeaDTerra]

22722 shares were placed as a sell order for 0.00066 BTC each
//DeaDTerra

[wisard]

Thank you for your response. It at least gives us an idea about your thought process.

While it might effect the short term liquidity of the market it has no long term effect of introducing more shares as the backing or underlying asset of is share is exactly the same independent of how many shares I issue.

What do you consider a short term vs what do you consider long term?

By the time long term comes into effect, the underlying assets might see a lot of change. Short terms are very important. Short terms don't always mean speculation.

For eg: I don't speculate. I research and invest. But I seek out irregular and asymmetrical information in the market - to make money off. Timing plays a very important role for this. To give you a non-bitcoin investment example, I research into annual rainfall a region receives. And based on that, I make a call on how well agriculture and companies that process food will do over the next 3-6 months. After 4-9 months, when the company's quarterly reports start reflecting the effect rainfall has had on their bottom line - everyone else starts buying and the price starts going up.  This is where I make my profit.  Buy low and sell high.

If a company issues new shares right before then, all my effort in researching goes to vain as it disallows me to sell at a price lower than theirs.  And the long term may completely change if the rainfall next year is poor. Meaning smart investors not earning good returns.

(This is what exactly happened with Eric and Satoshi Dice. Investors like me who were tracking the blockchain for profits made by Satoshi Dice could have sold our stake for 0.008 to 0.009 bitcoins per share. But because of the discounted issuance of new shares, we are stuck at selling them right above the price Eric determined. Who knows when Satoshi Dice will have an exceptional month like January again?)

Please do your best to announce your plans before hand. Whether it is regarding issuance of new shares. Or buying back of shares. Thank you.

[MPOE-PR]

The issue is each pass through share is usually priced at a premium than the MPex rate. I buy them at a premium.

This'd seem to be more an issue of you than of the PT. Why buy at a premium? Put your bid in at 95% of MPEx price and wait for it to be filled.

ii. Have liquidity in the market - allowing me to sell the shares at a price higher than I would be able to at MPex.

Basically it's like this: MPEx exists to put a skewer through the greater fool theory. You figure that's what "investing" means, so you just won't let go of it. Consequently you'd like someone to run a little bubble machine which is vaguely related to MPEx to offer it some backing, but sufficiently remote for you to still be able to play in your bubbles, make fiddy cent or w/e. It's not that the PT op "should" anything, it's that you shouldn't be doing this.

[Peter Lambert]

The issue is each pass through share is usually priced at a premium than the MPex rate. I buy them at a premium.

This'd seem to be more an issue of you than of the PT. Why buy at a premium? Put your bid in at 95% of MPEx price and wait for it to be filled.

ii. Have liquidity in the market - allowing me to sell the shares at a price higher than I would be able to at MPex.

Basically it's like this: MPEx exists to put a skewer through the greater fool theory. You figure that's what "investing" means, so you just won't let go of it. Consequently you'd like someone to run a little bubble machine which is vaguely related to MPEx to offer it some backing, but sufficiently remote for you to still be able to play in your bubbles, make fiddy cent or w/e. It's not that the PT op "should" anything, it's that you shouldn't be doing this.

It does not make sense for the pass-through to trade much higher than the underlying asset. While there is some convenience factor to the pass-through, the operator takes a cut of the profits. There is more risk because you have to trust an intermediary and one more exchange, so to me it makes sense for the pass-through price to be even less than 95% of the underlying asset.

[DeaDTerra]

The issue is each pass through share is usually priced at a premium than the MPex rate. I buy them at a premium.

This'd seem to be more an issue of you than of the PT. Why buy at a premium? Put your bid in at 95% of MPEx price and wait for it to be filled.

ii. Have liquidity in the market - allowing me to sell the shares at a price higher than I would be able to at MPex.

Basically it's like this: MPEx exists to put a skewer through the greater fool theory. You figure that's what "investing" means, so you just won't let go of it. Consequently you'd like someone to run a little bubble machine which is vaguely related to MPEx to offer it some backing, but sufficiently remote for you to still be able to play in your bubbles, make fiddy cent or w/e. It's not that the PT op "should" anything, it's that you shouldn't be doing this.

It does not make sense for the pass-through to trade much higher than the underlying asset. While there is some convenience factor to the pass-through, the operator takes a cut of the profits. There is more risk because you have to trust an intermediary and one more exchange, so to me it makes sense for the pass-through price to be even less than 95% of the underlying asset.

I agree with this.
You guys are better at saying what I wanted to say xD
//DeaDTerra

[wisard]

It does not make sense for the pass-through to trade much higher than the underlying asset.

It makes complete sense when your position in a bitcoin company trading on MPex is going to be about 100 to 300 bitcoins.
Spending 30 bitcoins just to trade when your position is going to be 10x the fees - that doesn't make financial sense to me.
(Most people on Bitfunder don't even have a position of 300 bitcoins. More like 20 bitcoins. But anyways...)

Satoshi Dice has paid dividends of 0.0005 per share in the past 6 months. 5% of that is 0.000025.

You would need a position of 1,200,000 million shares where you can justify the MPex fees over a 6 month time frame.

Even if the future growth rate of Satoshi Dice is 4x what it is now - and we consider a 1 year time frame instead of 6 months - you would still need a position of 150,000 shares at current prices. How many people have such a position?

I give an example of Satoshi Dice in a thread about MPOE only because that is the most valuable and traded share. The numbers only get worse for less valuable companies.

It makes perfect sense with someone who is going to buy fewer shares to pay a bit more. Paying a few mBTC or cBTC more and getting 5% less in dividends still gets you 15-25% annual yield (with Satoshi Dice). Paying 30 bitcoins in fees wipes that away - or at least takes you a couple of years to see returns.  This is why shares that pay less dividends still sell at a premium at pass throughs.

[wisard]

The issue is each pass through share is usually priced at a premium than the MPex rate. I buy them at a premium.

This'd seem to be more an issue of you than of the PT. Why buy at a premium? Put your bid in at 95% of MPEx price and wait for it to be filled.

Wait for it to be filled? Thats your suggestion?
Shows how much you value time and timing.

[wisard]

ii. Have liquidity in the market - allowing me to sell the shares at a price higher than I would be able to at MPex.

Basically it's like this: MPEx exists to put a skewer through the greater fool theory. You figure that's what "investing" means, so you just won't let go of it. Consequently you'd like someone to run a little bubble machine which is vaguely related to MPEx to offer it some backing, but sufficiently remote for you to still be able to play in your bubbles, make fiddy cent or w/e. It's not that the PT op "should" anything, it's that you shouldn't be doing this.

Are you saying that if the share prices of companies listed on MPex sells at a few mBTC more, its a bubble?

[Peter Lambert]

It does not make sense for the pass-through to trade much higher than the underlying asset.

It makes complete sense when your position in a bitcoin company trading on MPex is going to be about 100 to 300 bitcoins.
Spending 30 bitcoins just to trade when your position is going to be 10x the fees - that doesn't make financial sense to me.
(Most people on Bitfunder don't even have a position of 300 bitcoins. More like 20 bitcoins. But anyways...)

It does not matter what your size of position is, since the pass-through fee is a percent of profits. So whether you have a .01 btc stake or a 1000 btc stake, the pass-through still takes 5% of the profits. The MPEx fee is a flat fee, so there the total size does make a difference.

Yes, we are saying that if the current asking price on the pass-through is above the MPEx price, it would be better to put up a bid and wait for it to be filled. Alternately, you could buy the over-priced share and hope that the underlying asset goes up in price past what you paid for it, but either way you will have to wait some time for your investment to profit you anything.

[kjj]

The issue is each pass through share is usually priced at a premium than the MPex rate. I buy them at a premium.

This'd seem to be more an issue of you than of the PT. Why buy at a premium? Put your bid in at 95% of MPEx price and wait for it to be filled.

Wait for it to be filled? Thats your suggestion?
Shows how much you value time and timing.

It sounds like you understand very well the trade-off you are making.  Time or money.

[wisard]

It does not matter what your size of position is, since the pass-through fee is a percent of profits. So whether you have a .01 btc stake or a 1000 btc stake, the pass-through still takes 5% of the profits. The MPEx fee is a flat fee, so there the total size does make a difference.

Yes, we are saying that if the current asking price on the pass-through is above the MPEx price, it would be better to put up a bid and wait for it to be filled. Alternately, you could buy the over-priced share and hope that the underlying asset goes up in price past what you paid for it, but either way you will have to wait some time for your investment to profit you anything.

Thank you for the comment.

I'm not sure why I've been unclear in making my point: the number of shares on a marketplace - the supply - affects the price.
Because the pass through has limited supply, the prices will be consistently higher. (And the various pass throughs has proven this historically. Consistent is the key term.)

Maybe an example with small numbers will show this more clearly.

Say Tom opens a pass through with only 10 shares in it priced at 1BTC.
Harry buys all the 10 shares for 1BTC each. And places 3 of them for sale for 1.1BTC.
Dick comes and sees that his only option is to pay a bit more and buy the shares at 1.1BTC. Or pay 30BTC fee and buy the shares at 1BTC on MPex. So he buys them at 1.1BTC and lists them for sale at 1.15BTC. Because the supply is low, placing a bid and waiting won't help as Harry won't sell the shares at a lower 1BTC price ever.
Why does he buy at 1.1BTC when the price is 1BTC on MPex? Because he knows that he will see a good return on investment even by paying a 0.1BTC premium.
Now if Tom the pass through operator buys 10 more shares from MPex and lists them at 1BTC, it affects Dick's ability to sell. He has to now wait for the dividend payments to make more than 0.1BTC before he can list the share for sale and see a return on his investment.

Supply of one marketplace affects the prices on that marketplace. People are betting that the prices at a pass through will be consistently high - because they know of the 30BTC entrance fee and they know the supply. Supply affects the prices consistently.

The same asset can have different prices in different marketplaces. Its not about the asset's inherent value. Its about the demand-supply. This is why you consistently see oil prices in USA to be higher than that of Oman. You can't say place a buy order and wait for it to go down - because it never will - it will consistently be high - because of the supply.

Now I trust when DeaDTerra says that he won't abuse this right for arbitrage purposes. (And if you don't trust him, you shouldn't invest in his pass through at all.) But the question had to be raised before he said that. You had to understand his thought process.