Bitcoin Company Valuation

[RandomQ]

With the recent IPO of ZIGGAP, I was wonder how to Value a company when making an IPO.

Are most companies using a P/E Ratio?

Or just selling for as much as they could get?

Given ZIGGAP Valuation based on the information release, it may make sense to sell my ownership in a bitcoin company that is currently privately owned.

What are you looking for when buying a bitcoin company?

Please discuss this

Thank you

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[kokojie]

Same as the real stock market, valued by hope/dream/greed/fear

[Deprived]

With the recent IPO of ZIGGAP, I was wonder how to Value a company when making an IPO.

Are most companies using a P/E Ratio?

Or just selling for as much as they could get?

Given ZIGGAP Valuation based on the information release, it may make sense to sell my ownership in a bitcoin company that is currently privately owned.

What are you looking for when buying a bitcoin company?

Please discuss this

Thank you

There's no rational basis on which to value an IPO like ZIGGAP.  They have no past performance of any significance and haevn't bothered to release even basic information like a current balance sheet.  So it's more gambling than investment.

[BitcoinINV]

Yea I seen that too, It also looked like mild stock manipulation to me as well but I did not investigate it or anything. Just what I saw from a glance of the purchases.

[Peter Lambert]

With the recent IPO of ZIGGAP, I was wonder how to Value a company when making an IPO.

Are most companies using a P/E Ratio?

Or just selling for as much as they could get?

SatoshiDice is the only company I remember actually stating their expected P/E value when doing an IPO. But the P/E is just a number which anybody can calculate from the price and earnings. If a company wants you to invest in them, they should provide financial numbers like these. I see many of the IPOs around here do not provide such numbers, so there is no way to value them.

I just looked at ZipGap, and it looks like they are way overvalued. From the data they provide, I calculate something like a P/E of 41. (This is extrapolating from their less than a month earnings, so they apparently think they will grow fast.)

[wisard]

I just looked at ZipGap, and it looks like they are way overvalued. From the data they provide, I calculate something like a P/E of 41. (This is extrapolating from their less than a month earnings, so they apparently think they will grow fast.)

I think ZigGap is valued so highly because people believe it will grow very quickly.

- Coinbase grew to over a million dollars in transactions very quickly. There is a huge demand for "easy to use" methods of buying and selling bitcoins that is still not being met by the incumbent companies in the market.

- Quickbitcoins.net - the company owned by founders of ZigGap before they started ZigGap did pretty well - it was one of the first companies who managed to accept payments via credit cards. They seem to be able to execute well.

- ZigGap team is not taking any salary. They simply plan to be paid from their dividend payments - and they plan to hold 12.5 million shares of the company. So they should be highly motivated to hit the 1 million dollars in transaction number pretty soon themselves.

This is why demand for ZigGap shares seem so high. Its actually the market space - and not the company itself that is running the demand.

[burnside]

I really hope it takes off quick for them.  The btcjam loan is costing them over $3,000 USD/mo.

[Peter Lambert]

I really hope it takes off quick for them.  The btcjam loan is costing them over $3,000 USD/mo.

Which them are you referring to here?

[BitcoinINV]

Seems like there is a dispute of who is going to pay that BTCjam loan, its seems they sold there company again. They sold quickbitcoins then ziggap, it seems to be a mess of some sorts.

[wisard]

Seems like there is a dispute of who is going to pay that BTCjam loan, its seems they sold there company again. They sold quickbitcoins then ziggap, it seems to be a mess of some sorts.

My understanding is that Ryan and Stormy Schreiber took the BTCjam loan to start ZigGap. And they messed up in communication.

Their comments on BTCjam a couple of months back leads you to believe that the business would pay back the loan.

But their comments over here clearly state that the BTCjam loan will be paid back by the founders - Ryan and Stormy - who took the loan - and they now consider it as a personal loan. The money raised by the IPO won't be used to pay that loan.

Ryan and Stormy Schreiber have not sold ZigGap. But they have got a few more people to be co-founders since the BTCjam loan.

[BitcoinINV]

I am going to tell the credit card company, I consider this to be someone else's debt should work right? Lmfao

[burnside]

Seems like there is a dispute of who is going to pay that BTCjam loan, its seems they sold there company again. They sold quickbitcoins then ziggap, it seems to be a mess of some sorts.

My understanding is that Ryan and Stormy Schreiber took the BTCjam loan to start ZigGap. And they messed up in communication.

Their comments on BTCjam a couple of months back leads you to believe that the business would pay back the loan.

But their comments over here clearly state that the BTCjam loan will be paid back by the founders - Ryan and Stormy - who took the loan - and they now consider it as a personal loan. The money raised by the IPO won't be used to pay that loan.

Ryan and Stormy Schreiber have not sold ZigGap. But they have got a few more people to be co-founders since the BTCjam loan.

Either way pressure's going to be high on Ryan and Stormy.  The next couple months are going to be crucial.  They have to make $3,000/mo off their portion of the divs to break even.  The more shares they sell, the higher the company's income has to get before they (personally) hit that break even point.  I like what I see on their site.  Hope things work out.

[burnside]

It just hit me as I was reading in the other thread.  They're running the company doing the books in USD, so the $3,000/mo payment has to come after taxes.  A company has to pay income tax on it's income before it can distribute it as dividends.

Just a random example:

Company Gross Revenue: $10,000
Company Expenses: $1,000

Thus, Company Profit: $9,000
Company is an LLC, thus taxes pass through to the shareholders.  Say the owners pay income tax on this profit of 33%.  (just to keep the math simple)

Thus, remaining for dividends: $6,000
The plan (according to the thread) is to sell 35m/50m shares, or 70% of the shares.  Instead, for simplicity, let's assume they only sell 50%.

Thus, Ryan & Stormy would get from dividends: $3,000 which they then convert back to BTC to pay BTCJAM investors.

Money guys much better at this than I am please let me know if I'm horribly off-base.

The other consideration here is that because they are running the business using a base of USD, what they are doing is only legal if they (like Giga) collect AML/KYC info on everyone they share profits with and annually report this to the IRS via 1099's.  (at which point you become responsible for paying income tax on your divs based on the USD value of the BTC you receive at the time the dividend is issued.)

I'm starting to ramble, but you can see they need to see some pretty good numbers to hit paydirt.  Operating in USD is going to cost 'em ~30% right off the top.

[Peter Lambert]

It just hit me as I was reading in the other thread.  They're running the company doing the books in USD, so the $3,000/mo payment has to come after taxes.  A company has to pay income tax on it's income before it can distribute it as dividends.

Just a random example:

Company Gross Revenue: $10,000
Company Expenses: $1,000

Thus, Company Profit: $9,000
Company is an LLC, thus taxes pass through to the shareholders.  Say the owners pay income tax on this profit of 33%.  (just to keep the math simple)

Thus, remaining for dividends: $6,000
The plan (according to the thread) is to sell 35m/50m shares, or 70% of the shares.  Instead, for simplicity, let's assume they only sell 50%.

Thus, Ryan & Stormy would get from dividends: $3,000 which they then convert back to BTC to pay BTCJAM investors.

Money guys much better at this than I am please let me know if I'm horribly off-base.

The other consideration here is that because they are running the business using a base of USD, what they are doing is only legal if they (like Giga) collect AML/KYC info on everyone they share profits with and annually report this to the IRS via 1099's.  (at which point you become responsible for paying income tax on your divs based on the USD value of the BTC you receive at the time the dividend is issued.)

I'm starting to ramble, but you can see they need to see some pretty good numbers to hit paydirt.  Operating in USD is going to cost 'em ~30% right off the top.

I think they could deduct the interest on the loan before income tax, right? I guess that goes back to whether it is the company paying the loan or the individual, and how they have legally set up the business. Have they released any documents about incorporation status or the legal standing of their company?

[burnside]

I think they could deduct the interest on the loan before income tax, right? I guess that goes back to whether it is the company paying the loan or the individual, and how they have legally set up the business. Have they released any documents about incorporation status or the legal standing of their company?

In the forum they've claimed it's a personal loan, so no.

If they do claim it as a business loan, then yes, the interest becomes a business expense.

If I were them I'd claim it as a business loan.  Besides the tax benefits, they're far better off personally if they're not on the hook if things go south.