P/B ratio, or how to not get raped in the Bitcoin securities markets

[Vbs]

Book value is today.  Future profits that are retained for reinvestment are in the future.

A mining asset that reinvests is a good concept.  AT THE RIGHT PRICE.

Great. You should start updating them daily then, from now on.

[Deprived]

The money's always in selling spades not in digging.  That's why ASICMINER is so much better than most - as they do both.

PMBs rent you a spade - usually at a price that's a LOT more than actually buying a spade yourself.

Mining shares use YOUR (investors) money to buy spades, dig with them and keep some of whatever's produced by digging themselves.  Even when the spade never digs enough to cover its cost.

AMC uses YOUR money so another company owned by Ken can make profit from building and selling spades.  You get some spades yourself in return, but have to pay for your them in advance to him even though by the time the spades arrive you could probably buy them elsewhere cheaper.  There's no guarantee the spades will ever be delivered - and no penalty in the contract if they're late.

I think Entropy's P/B valuation is unfair on AMC - as it should also include whatever cash AMC has.  But Ken pretending his personal shares don't count as they aren't shown as issued on Bitfunder is hilarious.

I agree with your spades metaphor. However, he is valuing AMC against assets that are selling a fixed amount of spades, at a fixed price, so they have a static book value.

As AMC is buying more spades with any shares sold+dividends (income), its book value is constantly increasing, as the maximum share number is already fixed.

You can't include future projected profits into a book value (much as some idiots here would like to).  Book value isn't the only way to value things (and I'd say it isn't a good way at all for PMBs) but if you're going to use it at all then you can only look at the current value of things.  Which is either what you paid for them (less depreciation) or what they could be sold for.

[Deprived]

The money's always in selling spades not in digging.  That's why ASICMINER is so much better than most - as they do both.

PMBs rent you a spade - usually at a price that's a LOT more than actually buying a spade yourself.

Mining shares use YOUR (investors) money to buy spades, dig with them and keep some of whatever's produced by digging themselves.  Even when the spade never digs enough to cover its cost.

AMC uses YOUR money so another company owned by Ken can make profit from building and selling spades.  You get some spades yourself in return, but have to pay for your them in advance to him even though by the time the spades arrive you could probably buy them elsewhere cheaper.  There's no guarantee the spades will ever be delivered - and no penalty in the contract if they're late.

I think Entropy's P/B valuation is unfair on AMC - as it should also include whatever cash AMC has.  But Ken pretending his personal shares don't count as they aren't shown as issued on Bitfunder is hilarious.

I agree with your spades metaphor. However, he is valuing AMC against assets that are selling a fixed amount of spades, at a fixed price, so they have a static book value.

As AMC is buying more spades with any shares sold+dividends (income), its book value is constantly increasing, as the maximum share number is already fixed.

Book value is today.  Future profits that are retained for reinvestment are in the future.

A mining asset that reinvests is a good concept.  AT THE RIGHT PRICE.

And only if it reinvests so that the profit from that reinvestment gos to the company investing - rather than to a different one not owned by investors.

[furuknap]

Book value is today.  Future profits that are retained for reinvestment are in the future.

So the ordered, not-paid-for 200THs from AM shouldn't be included in the P/E of 3 you mention, right?

BTW, why would reinvestment from the company matter? If investors want, they can use returns to buy additional shares. When the mining business model doesn't change, it won't matter whether the company invests 10% more in mining or the investor buys 10% more shares.

.b

Hint: There is an answer in there for you, one that will help you in your cause. See if you can find it.

[Entropy-uc]

The money's always in selling spades not in digging.  That's why ASICMINER is so much better than most - as they do both.

PMBs rent you a spade - usually at a price that's a LOT more than actually buying a spade yourself.

Mining shares use YOUR (investors) money to buy spades, dig with them and keep some of whatever's produced by digging themselves.  Even when the spade never digs enough to cover its cost.

AMC uses YOUR money so another company owned by Ken can make profit from building and selling spades.  You get some spades yourself in return, but have to pay for your them in advance to him even though by the time the spades arrive you could probably buy them elsewhere cheaper.  There's no guarantee the spades will ever be delivered - and no penalty in the contract if they're late.

I think Entropy's P/B valuation is unfair on AMC - as it should also include whatever cash AMC has.  But Ken pretending his personal shares don't count as they aren't shown as issued on Bitfunder is hilarious.

I agree with your spades metaphor. However, he is valuing AMC against assets that are selling a fixed amount of spades, at a fixed price, so they have a static book value.

As AMC is buying more spades with any shares sold+dividends (income), its book value is constantly increasing, as the maximum share number is already fixed.

Book value is today.  Future profits that are retained for reinvestment are in the future.

A mining asset that reinvests is a good concept.  AT THE RIGHT PRICE.

And only if it reinvests so that the profit from that reinvestment gos to the company investing - rather than to a different one not owned by investors.

This is a very good point.  One look at the corporate structure of V/AMC would be enough for any rational investor to refuse to touch it with a 10 foot pole.

I especially like how AMC has been 'incorporated' in a different country every time I look.

[Deprived]

Book value is today.  Future profits that are retained for reinvestment are in the future.

BTW, why would reinvestment from the company matter? If investors want, they can use returns to buy additional shares. When the mining business model doesn't change, it won't matter whether the company invests 10% more in mining or the investor buys 10% more shares.

In theory that's why mining shares CAN be compared to PMBs (for value).  It breaks down in practice because until recently the price of PMBs wasn't falling in line with their value - making reinvestment in them far worse value than internal reinvestment.

Internal reinvestment works better for companies than relying on new share sales because they can predict cash-flow better and so plan further ahead.

In practice it works WORSE for investors as they have no way to stop it when they realise that it's losses being compounded not profits - which is the case for the vast majority of crypto 'businesses'.  The issuer gets to keep reinvesting and taking a cut out of it even when it's obvious investors are losing - with no way for investors to pull the plug or stop the waste (they can only try to find a bigger idiot to pass them on to).

[Vbs]

You can't include future projected profits into a book value (much as some idiots here would like to).  Book value isn't the only way to value things (and I'd say it isn't a good way at all for PMBs) but if you're going to use it at all then you can only look at the current value of things.  Which is either what you paid for them (less depreciation) or what they could be sold for.

This is why book value is a blinded valuation for any of this. Zero forecast. The credits for its use are definitely for the Economics Nobel on this tread, not me. I'm just AMC's useful idiot, remember?

[Deprived]

The money's always in selling spades not in digging.  That's why ASICMINER is so much better than most - as they do both.

PMBs rent you a spade - usually at a price that's a LOT more than actually buying a spade yourself.

Mining shares use YOUR (investors) money to buy spades, dig with them and keep some of whatever's produced by digging themselves.  Even when the spade never digs enough to cover its cost.

AMC uses YOUR money so another company owned by Ken can make profit from building and selling spades.  You get some spades yourself in return, but have to pay for your them in advance to him even though by the time the spades arrive you could probably buy them elsewhere cheaper.  There's no guarantee the spades will ever be delivered - and no penalty in the contract if they're late.

I think Entropy's P/B valuation is unfair on AMC - as it should also include whatever cash AMC has.  But Ken pretending his personal shares don't count as they aren't shown as issued on Bitfunder is hilarious.

I agree with your spades metaphor. However, he is valuing AMC against assets that are selling a fixed amount of spades, at a fixed price, so they have a static book value.

As AMC is buying more spades with any shares sold+dividends (income), its book value is constantly increasing, as the maximum share number is already fixed.

Book value is today.  Future profits that are retained for reinvestment are in the future.

A mining asset that reinvests is a good concept.  AT THE RIGHT PRICE.

And only if it reinvests so that the profit from that reinvestment gos to the company investing - rather than to a different one not owned by investors.

This is a very good point.  One look at the corporate structure of V/AMC would be enough for any rational investor to refuse to touch it with a 10 foot pole.

I especially like how AMC has been 'incorporated' in a different country every time I look.

Yes - I lost all interest in AMC once it became apparent it only existed to finance VML, with a few crumbs of mining income thrown investors' way.   That plus the one-sided contract where there's no penalty for late delivery and if AMC cancel, VML can repay the cash paid with whatever spare parts it has lieing around.  In something time-critical (which mining is) a contract without a penalty clause for late delivery is useless - as the purchaser takes on all the risk and costs of full/partial failure by the supplier.

[Vbs]

Pretty much pointless to continue this discussion. Everyone has already made their mind based on their way of looking into things and what they value most.

Entropy, I hope you took my comments to you lighthearted, I meant to spike, not to offend.

[Peter Lambert]

Pretty much pointless to continue this discussion. Everyone has already made their mind based on their way of looking into things and what they value most.

One problem with trying to value companies in this way (P/B) is that it is so hard to figure out what the book value is. This should be pretty straightforward check of previous company statements, but it seems to be hard for some of the companies around here to actually say what their assets are.

[furuknap]

The 200 TH/s is paid for.  I priced it at the same value I used for your hardware in the calculations.

Is it? I haven't heard that from friedcat. Want to provide a link?

.b

[furuknap]

The 200 TH/s is paid for.  I priced it at the same value I used for your hardware in the calculations.

Is it? I haven't heard that from friedcat. Want to provide a link?

.b

https://bitcointalk.org/index.php?topic=99497.0

Go back a few months to where here ordered the wafers and you will see he held back coins to pay for them.

So do tell: how much did you pay for the hardware you purchased?

Thanks for bumping the thread.

Actually, I think you've misunderstood how it works. You made the claim and need to back it up. Saying I should find it myself isn't the way to prove your statements are true.

You see, from what I remember, he held back funds for the additional 50TH after the first test batch of 12 TH. I remember because it was one of the first updates after I bought AM. It was something around 700BTC or roughly $70K, nowhere near the $2M he needs to pay for 200TH assuming the price of $10K per TH.

To answer your question, I pay more than AM and charge less. Am I still a scammer?

.b

[furuknap]

I did not call you a scammer.

I said issuing mining bonds is an inherently dishonorable practice.

Well, I distinctly recall you mentioned my asset specifically. In fact, I seem to recall you saying

You are trying to rip people off 50% less than Ken from AMC.  I'll give you that.

So I'm ripping people off, but that's not scamming. Is that correct?

Which it is because it is not possible to offer bonds at a fair price.  And 20x the price of hardware that will ship when yours arrives is a very bad price.

Ah, but AMs pricing (and yours) of 30x is OK? Isn't that a bit hipocritical? When AM does it far worse, it is fine because it builds your share value but when I do it, it's a very bad price? You just used 30x yourself as a reasonable pricing for the P/B rate yourself. Are you now backing down from that?

As for the rest, you misunderstand.  I don't need to prove anything to you.  I'm not trying to raise money.

Well, since we've dispensed with the need to prove our statements, I read that you're having intimate relations with sheep. It is now equally true to your valuation based on $2million of value just appearing out of nowhere.

.b

[blackreplica]

To the OP. Don't let the PMB operators get you down. I read this thread and you opened my eyes. Plenty of other's eyes as well I'm sure. Keep up the good work. The fewer newbies to bitcoin who buy these junk bonds, the better

[Entropy-uc]

To the OP. Don't let the PMB operators get you down. I read this thread and you opened my eyes. Plenty of other's eyes as well I'm sure. Keep up the good work. The fewer newbies to bitcoin who buy these junk bonds, the better

Thanks.  I do appreciate the positive feedback.  But you shouldn't worry about me.  These guys are pikers.  You should have seen the abuse I was taking last year at the hands of PatrickHarnett, Inaba, and GigaVPS.

Of course that fact that all 3 of those twats are completely discredited in this community today helps to strengthen my resolve.   

[Entropy-uc]

(...)
AMC - Price: 100 000 000 * 0.0008  = 80000 BTC.  Book value (6 Avalons at 70 GH/s + 5 TH/s of future hashing) 2260 BTC.  Price to book 35

It should be obvious why these securities are beneficial only to their issuers, and why listings for BFMINES and AMC on BTCT.co should be rejected.

There is a difference between outstanding shares and authorized shares. I would suggest you looking into it before writing these shiny pearls of information...

You are nothing but a useful idiot for Ken.  Ken has issued 100 Million shares.  He controls 60 million  of these shares.  20 million of those are a vehicle for retained earnings.  They are still outstanding shares.

And the price to book for AMC is still 35.  Well over 10 times ASICMINER right now.

There are only 40 Million Issued shares.  See the proof below:

From your asset profile on Bitfunder:

1 share of AMC on BitFunder represents 1/100,000,000th of 100% of the monthly profits after all expenses.

AMC shares offer no voting rights. Shares of AMC on BitFunder do not represent real world shares of the
company. The shares are solely a distribution mechanism for rights to profits.

20,000,000 shares will be retained by AMC to maintain a growth and expansion fund.

As of the time of this writing, up to 40,000,000 will be released over time to the public on a varying
time scale as capital is required to complete the project. Any remaining shares not included in the
IPO are owned/maintained/controlled by AMC. These shares will be used at the issuers discretion
for any uses deemed fit. These uses are not limited to, but may include employment.

1 share is one 100 millionth of AMC.  And AMC's assets are worth less than 1/35th of the share price.  Plus as you specifically state, "As long as AMC does not sell it's shares below 0.0005 then they may do as they please with their shares. It is their company, their ownership, and their shares."  So you can fuck your shareholders any way you want, if you ever decide that a 3500% mark up wasn't enough.  

SDICE shareholders are learning all about that experience right now.

It seems that Ken acknowledges that he lied about there only being 40M shares, and recognizes that the true value of one share of AMC is 1/100 Millionth of AMC, giving the company a price to book of 35.  It must be great to be able to sell assets to suckers at a 3500% markup.

[furuknap]

ASICMINER has a price to book of ~3.

So far, you have yet to prove that or come even close. Last I checked, you were hovering somewhere around the ~100 area of P/B or ~18 if you agree that the proceeds on my asset is half that of AM.

There is plenty of uncertainty about that number because there isn't a solid balance sheet to evaluate all the assets with.  That number is based upon 1) Valuation of the existing hashrate at 3 BTC / GH/s

OK, great, in that case, with my asset having 120GH/s of hashrate, the valuation would be 360BTC, so the P/B would be in the area of 1.1.

.b

[Eric Muyser]

The recent controversies over mining bonds has made me realize that people are missing a fundamental of value analysis.  If you use a few simple tools, being ripped off by the sharks issuing bitcoin securities becomes a lot less likely.

A simple measure is price to book value.
http://www.investopedia.com/terms/p/price-to-bookratio.asp

This is simply the market value of the security divided by the value of it's assets.  In very basic terms it is the markup that the shares are being offered at relative to the existing assets.  It gives you an idea of the value that could be recovered from the security in receivership.  Note that it is common for stocks to trade at a price to book under 1.  This could indicate a great bargain, or it could indicate a stock where management is actively skimming value to themselves at the expense of shareholders.

ASICMINER's IPO sold at a price to book of 2.  That is because all the investor funds went into the company, and the principals held 50% of the stock as sweat equity.  Today, I estimate the price to book of ASICMINER to be less than 3.  That is based upon valuing existing hash rate at 3 BTC / GH/s, and future hash rate at 0.2 BTC.

Now let's look at a couple other offerings.

TAT.V - no assets, just a promise from a psuedonym on the internet.  Price to book value here is infinite. 
BFMINES - hash rate purchased at $20 / GH/s and selling for $400 / GH/s.  Price to book of 20.
AMC - Price: 100 000 000 * 0.0008  = 80000 BTC.  Book value (6 Avalons at 70 GH/s + 5 TH/s of future hashing) 2260 BTC.  Price to book 35

It should be obvious why these securities are beneficial only to their issuers, and why listings for BFMINES and AMC on BTCT.co should be rejected.

You know what man, I'll get raped however way I feel like okay?

[EskimoBob]

 
How do you calculate the book value for a Co if you have never seen their "books"? Or to be more precise, if you have never seen reports like P/L, C/F, and the the balance sheet for the last N months.
They "probably sold X units" and "had a IPO for N but..." are not numbers you can use to calculate the P/B because you do not know what the "B" is.

It truly amazes me that Co's lie ASICMINER or SDICE, who roll around in thousands of BTC (hundreds of thousands of EUR) can not find a bookkeeper, who is capable compiling a proper P/L, C/F and the the balance sheet. All I can say is: "WTF!"

For f*** sake people, AM guys managed to design and manufacture the first ASIC chip and distribute it all around the world but can not find a little chink lady to do the numbers for them? Seriously?
Same applies to Evorhees and SDICE. Co that has managed to generate over 70K profit in BTC, is incapable of standard bookkeeping and can not even produce  reports so investors can evaluate the Co? WTF!
Same "WTF!?" applies to all the listed Co's in all the exchanges. If you can not put together proper reports, find someone who can.
I honestly help that Exchanges take a lead here and start demanding standard reporting. It's good foe everyone.

Cheers!

[MPOE-PR]

While the details may be a little off, the concept itself is useful in many places.

On the other hand you've missed out perhaps your best example possible: S.MPOE book 0, mkt cap ~780,000 BTC. 

Another important and quite Bitcoin-specific point is the Cost of Book. Ie, a company with 10k BTC worth of gear (call it SkepsiDyne in loving memory of the Global Scam Exchange) is actually to be discounted with the CP risk of the op, because the higher the book gets, the more heavily it weighs on the operator. Even small operations (take Usagi's now famous few-hundred BTC lolsecurities, or EskimoBob's Art pseudoasset) suffer from the same problem (as obviously you can find consciences for sale at any price).