and so I'm trying to get an estimate of the bonds annual yield
First, Satoshi Dice is an equity play; not a bond. So you should be doing the appropriate financial analysis.
All original shares from the IPO have now been sold.
Now that you are quite a bit richer (or rather, your assets are more liquid now) what sort of stuff are you going to do with all those bitcoins (if you would like to share)?
A nice 8% jump in price has been nice for those of us holding shares. Where are all those people saying this was a horrible stock to hold? Cause it would take "like 10 years to make any money!"?
Well, actually its trading at around 0.0047 now so that is more like a 40% gain.
While not being a fan of the vices, this does present a fairly finance textbook example of a melt-up due to good news. Let me run through the analysis for the fun of it.
Although December had unusually high earnings of 3.2% (17,206.44888669 /537,375.97) the intriguing part is the strengthening of the SD balance sheet to the tune of about 28,000 BTC retained earnings.
To be conservative we
will assume the public float dividend were doubled and paid out to the
anonymous investor holding the other 90%. After all, the anonymous investor owns 9x more than the public float and would not want to jeopardize SD's solvency potentially having to shutter it due to
bad luck and has probably not taken any dividends since they probably have plenty of cash from the IPO and could probably fly private wherever they want with this type of monthly cash-flow.
This leaves about 25,000 BTC of retained earnings which to exhaust would require about
-4.795% negative luck on 550,000 BTC of bets compared to the Dec beginning retained earnings of
-2.22%. Assuming the anonymous investor has taken no dividends then the luck probabilities change to
-5.11% and
-2.29%.
In other words, if you do the
probability (some other math whiz can solve this if they feel particularly
magnanimous) that SD will exhaust its RE's due to bad luck in the dice game and cease being a going concern then it reveals that solvency risk just plummeted massively causing an increase in the expected discounted future cash flows.
Everything else being equal, this additional 15,500 BTC of retained earnings, makes SD much
safer of an investment with a much higher NPV which is already corrected for BTC exchange rate risk.
Consequently, a melt-up in the price is to be expected. What is fairly exceptional is that the issuer did not cancel the IPO's at .0037 or at least move the bid up; or maybe the anonymous investor bought them using some dividends. But that is neither here nor there, using a similar risk premium before Dec's earnings would put a price around
at least .0075. So it will be interesting to see how long it takes to get there; assuming an average Jan luck.
