[MPEx] Introducing B.PPTAPR.SYNTH, or Now You Too Can Be Short Pirate (tm).

[MPOE-PR]

Quoting from the asset page:

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The holders of this asset on the date of May the 21st at 23:59:59 UTC time will receive a single dividend payment of 0.00128000 BTC per share, provided that in the interval there did not occur a credit event as defined below. At that date, or at the date of the credit event (whichever comes sooner) the due dividend if any will be paid, this asset will discontinue trading on MPEx and all existing shares will be discarded as worthless.

A credit event is defined, for the puproses of this contract, as any one of the following :
Any of the promised PPT issuances in the interval fails to take place within 24 hours of its stated date. The original language of the original issuer reads :
What are you selling?
Each week we will auction off up to 2000 zero coupon bonds with a face value of 1.28 BTC that will mature exactly 27 days 22 hours after the close of the bond auction.

When will the bond auctions take place?
The bond auctions will take place every Saturday morning at 2 AM UTC. That is every Friday evening at 7 PM PDT, 8 PM MDT, 9 PM CDT and 10 PM EDT.
Thus, in the interval April 19 10:00:00 UTC and May 21, at 23:59:59 UTC there must appear five such offerings, specifically no later than the 21st of April, 28th of April, 5th of May, 12th of May and 19th of May. Since the issuer reserves the right to issue fewer than the stated 2`000, any issuance of less than 10% of that maximum, or 200 shares of 1 BTC principal each or at any rate shares of total value less than 200 BTC will be considered a full credit event.

Any of the PPT issued in agreement with the original terms by the original issuer fails to pay the promised dividend within 12 hours of the stated time. The original laungage of the original issuer reads :
When will the bonds mature and pay me my money?
The bonds will pay the face value of 1.28 BTC exactly 27 days and 22 hours after the close of the bond auction on Saturday mornings at 12 AM UTC. That is every Friday evening at 5 PM PDT, 6 PM MDT, 7 PM CDT and 8 PM EDT.
thus payments must be made no later than by the following midnight, UTC time.

There is convincing proof brought in any public venue by respected members of the community that the underlying issuer for the PPT issue (that is pirateat40's opperation, whatever it may be called by that time) has either ceased to make due payments on his debt or has negotiated lower payments than the originally promised 7% a week. The original language of that issuer reads in pertinent part,
7-Day Interest Rate on Deposits (based on average balance)
100 BTC + 4.2%
500 BTC + 5.6%
2000 BTC + 7.0%

The total ammount issued in the five PPT issues due until the expiration of this instrument is less than 10`000 BTC worth, however those shares may be split up. In this case the dividend paid on this instrument will be a fraction of its face value equal to the proportion of PPT issues out of 10`000 BTC worth. So as an example if the first PPT issues 2`000 BTC worth of shares, and the four subsequent ones each issue 1`000 BTC worth of shares the holders of this instrument will receive 0.00050000 BTC per share held. Note that this point only discusses the volume of issued shares, and is not concerned with the proportion actually sold.
It is the owner's considered oppinion that there is significant risk involved in buying this asset (specifically, the underlying of the underlying is in all likeliness a Ponzi scheme in the final phase of its operation). Consequently this issue is not adequate for the needs of the small or unsophisticated investor. You would be well advised to only invest sums that you do not immediately depend upon.

This issue is available for shorting, inquire with the owner for borrowing shares.
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Have fun now!

[Sukrim]

Wouldn't it be easy for the PPT.X owners to buy massive amounts of these shares and even if pirate defaults offer a single share each week - paying the <=28 Bitcents out of their pocket and then cash out big time in the end of May?

[MPOE-PR]

In principle. In practical terms the owner can use the money to buy those very shares, or in other words it works just about even.

[MPOE-PR]

To clarify for the many that have asked (sorry for not having put it in here from the beginning):

In order to borrow these shares you will need collateral equal to their maximal maturity value (ie, 0.00128000 BTC per share). This collateral is held as an escrow and you are immediately given the corresponding share block. On the asset destruction you will receive the part of collateral due to you (ie, all or part of it in case of credit event, none of it otherwise).

Note that collateral will have to be a BTC integer, which means you can only get multiples of 3125 share blocks (each worth 4 BTC of collateral).

There isn't unfortunately an automated means to process all this yet, so you will have to make your request in pm or IRC (#bitcoin-otc-eu). Obviously means you will have to have sufficient funds in your account at the moment you make the request, so please make sure you've already deposited if you need to. If your account is margined (see that discussion) you can use any portion of your margin for this without restriction.

[copumpkin]

As I asked in Meni Rosenfeld's thread, is Mr. Popescu "going long" on pirateat40 by issuing these?

[brendio]

As I asked in Meni Rosenfeld's thread, is Mr. Popescu "going long" on pirateat40 by issuing these?

No, because this functions oppositely to Meni's. MP is definitely short because he is liable for the 0.28 interest if there is no default (sorry, credit event). His credit events are pretty broad though, making his investment much riskier than the PPT.x series.

[copumpkin]

As I asked in Meni Rosenfeld's thread, is Mr. Popescu "going long" on pirateat40 by issuing these?

No, because this functions oppositely to Meni's. MP is definitely short because he is liable for the 0.28 interest if there is no default (sorry, credit event). His credit events are pretty broad though, making his investment much riskier than the PPT.x series.

Okay, I thought so, but then I'm confused about why MPOE-PR is acting so confrontationally about someone who isn't competing. MP wants ways to short pirateat40, and Meni (as well as MP's counterparties on his contracts) offers him one way to do that.

Furthermore, "I too" can be short pirateat40 only if someone else goes to MPEX and goes long.

[brendio]

Furthermore, "I too" can be short pirateat40 only if someone else goes to MPEX and goes long.

That, I think, is the biggest drawback. I'd be interested in getting some of these to short, but I'm not sure there's much market for them with people going long. I can't see why someone wanting to go long wouldn't just buy the underlying PPT.A. Thus, B.PPTAPR.SYNTH will need to sell at a discount. As PPT.A will likely sell for more than 1.0 BTC each, there likely is a discount, although I think there is a time mismatch in there as well, so it's hard to tell.

[MPOE-PR]

@ Copumpkin and Brendio: Of course, if you have 4 BTC or more to venture, you can borrow some shares.

[copumpkin]

@ Copumpkin and Brendio: Of course, if you have 4 BTC or more to venture, you can borrow some shares.

From whom?

[MPOE-PR]

From Mircea Popescu himself!

[MPOE-PR]

Amusingly enough the Burt Wagner syndicate stepped down their offering so the bond is already in distress at around 75% of par (that's ~2500 basis points down from last night, or an implied interest rate of ~70%). Some of the easiest money anyone ever made in BTC.

[Sukrim]

I guess that's because of

The total ammount issued in the five PPT issues due until the expiration of this instrument is less than 10`000 BTC worth, however those shares may be split up. In this case the dividend paid on this instrument will be a fraction of its face value equal to the proportion of PPT issues out of 10`000 BTC worth.

- something that is not at all present in the original bond (which doesn't depend on future offerings of similar bonds). I guess that's also why it isn't really equivalent to PPT.X shares.
Also it runs until May 21st (a Monday) and additionally I don't get the example

So as an example if the first PPT issues 2`000 BTC worth of shares, and the four subsequent ones each issue 1`000 BTC worth of shares the holders of this instrument will receive 0.00050000 BTC per share held.

2000 + 4*1000 = 6000
6000/10000 = 0.6

0.00128 * 0.6 = 0.0005(<-- wrong! It should be 0.000768)
Even 0.001 * 0.6 != 0.0005

However:
In case of a credit event you also pay out the 0.00128? ("At that date, or at the date of the credit event (whichever comes sooner) the due dividend if any will be paid[...]")
In that case it might be interesting having a look at your bonds...

[MPOE-PR]

Apparently somebody can't do math, and that somebody will be enraged. Thanks for pointing it out. It should be 0.00060000  not 0.00050000.

Otherwise "the due if any" should be pretty clear, I'd say, no?

[MrTeal]

Apparently somebody can't do math, and that somebody will be enraged. Thanks for pointing it out. It should be 0.00060000  not 0.00050000.

Otherwise "the due if any" should be pretty clear, I'd say, no?

So with the PPTAPR.SYNTH bonds, if PPT issues 1500 in each series you would then pay out 0.001*(7500/10000)=0.0075BTC/share, and not 0.00128*(7500/10000)=0.0096BTC/share? Is the face value of each share not 0.00128?

[Sukrim]

So in the end your bond runs longer, will already now pay 5% less than face value max., because only 9500 shares will max. be issued (potentially even less) and for sure not the 28 bonus bitcents per BTC...

Somehow this sonds like a worse deal than PPT.X bonds to me, especially with this point #4.

If I buy now 1000 shares at 70 bitcents, credit event #4 will almost certainly happen (in 4 hours we know more) - so the max. I can get out of this is 95 bitcents. If they issue 1500 shares every time, I gain 75 bitcents at the end - even some mining bonds could earn more than that probably, if I watch dividend announcements closely.

[MPOE-PR]

So in the end your bond runs longer, will already now pay 5% less than face value max., because only 9500 shares will max. be issued (potentially even less) and for sure not the 28 bonus bitcents per BTC...

You do realise that this contract was written before the wanna-be bankers defaulted on their original arrangement, and came up with 1500 instead of 2k, right? Obviously the bond would reflect that.

Otherwise, ~70 cents paying 95 is on the last call +35%, so still way better than the supposed 28%.

If you don't believe that Burt & Co / Pirate are actually going to ever keep to their word (an opinion shared by more and more as time goes by) you can go right ahead borrow some shares and try and sell them. That's the beauty of an actual free market (something the alternative is not): you can take either side of the deal.

[MPOE-PR]

So with the PPTAPR.SYNTH bonds, if PPT issues 1500 in each series you would then pay out 0.001*(7500/10000)=0.0075BTC/share, and not 0.00128*(7500/10000)=0.0096BTC/share? Is the face value of each share not 0.00128?

I'd think it's in the contract, but to rehash: if Burt Wagner & co stuck to their word and issued 2k shares as promised each week and pirate didn't default and the payments were made as promised, each share was going to pay 0.00128, each 1k shares 1.28 BTC.

If pirate defaults or payments aren't made shares are worthless.

If Burt & Co fail to issue the amount they claimed they will (which they already have) the value of shares is the proportion of 5 x 2k they actually do issue. So far if they do 4 more of 1,5k each that proportion is 75 cents to the dollar (putting a share at 0.00075, or .75 BTC per 1k) and if they do 4 more of 1,5k each that proportion is 95 cents to the dollar (putting a share at 0.00095, or .95 BTC per 1k). All this of course provided that the rest of the deal - ie regular payments and pirate non defaulting hold true.

[MrTeal]

So in the end your bond runs longer, will already now pay 5% less than face value max., because only 9500 shares will max. be issued (potentially even less) and for sure not the 28 bonus bitcents per BTC...

You do realise that this contract was written before the wanna-be bankers defaulted on their original arrangement, and came up with 1500 instead of 2k, right? Obviously the bond would reflect that.

Otherwise, ~70 cents paying 95 is on the last call +35%, so still way better than the supposed 28%.

Only if they issue 2000 in the next four bonds, which they never actually stated they would do. They aren't defaulting by issuing 1500 bonds since the wording has always been "up to 2000". In the event that only 1500 are issued in each asset, the return before fees would only be 7%.
The synthetic bonds would be worthless if pirateat40 doesn't default but reduces weekly interest by 1%, while the PPT bonds would still be covered at face value. Not only that, but based on the wording of the MPOE bond any hiccups in payout or bond start time would be a credit event. The synthetic bonds also payout 0% if pirate defaults while the PPT bonds pay out 25%.

At current prices you'd have to be a fool to purchase the synth bonds even at 0.0007/share given the return is only a few percent better in the best case and the risks are much higher.

[MPOE-PR]

which they never actually stated they would do.

The thing which now reads "[ANNOUNCE GLBSE] 1500 PPT.A Pirate Pass Through Bonds" was [ANNOUNCE GLBSE] 2000 PPT.A Pirate Pass Through Bonds for a few days. The fact that the forum allows you to surreptitiously change your words does not mean you did not in fact say them.

I understand people have a little difficulty with notions such as responsibility and so forth, but when money's involved all plays are for keepsies, and they have consequences.

And again, you can just SELL them if you don't want to BUY them.