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Author Topic: [GLBSE] BDK -- LIQUIDATING UNDER NEGATIVE EQUITY PROVISION --  (Read 18581 times)
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April 20, 2012, 12:31:29 AM
 #1

(9/11/12) BDK is ceasing operations effective immediately due to crushing negative equity. BDK-holders who did not take part of the voluntary recall will receive .02BTC/share under the negative equity provision on 11/26 or ASAP if Nef allows it.



(6/30/12) Current and prospective BDK unit-holders, please read the new contract which will go into effect on September 4th, 2012 at https://bitcointalk.org/index.php?topic=77343.msg999596#msg999596

(7/11/12) BDK suffered massive losses in July as part of a liquidity crisis. Dividends will be "suspended" until early August. Details @ https://bitcointalk.org/index.php?topic=77343.msg1024725#msg1024725

What does BDK do?
The primary goal of BDK is to lend money where needed to stimulate the growth of Bitcoin-associated business. BDK additionally purchases and resells securities as well as invest in various Bitcoin-associated ventures for equity stakes. For details on BDK's finances & operations, go here: https://docs.google.com/spreadsheet/pub?key=0Ao892S4MOoDZdGZSbjJVd1ZTbFVLZE5aRE95bE91NVE&output=html

What is this offering, exactly?
Each share (I'm calling them shares, but this is more of a debt instrument -- it's a share of the profits, but "BDK" does not represent equity) represents .0009% of BDK weekly profit, paid every Monday. I add operating profits, deduct operating expenses, then pay out the amount due to shareholders. After that, I deduct personal expenditure from the amount my shares have earned. Everything leftover goes into BDK coffers. These "units" for sale are non-voting and do not represent equity.

How many shares are being sold?
Up to 5k shares will be sold on the second day of each month (until after the offering on the second day of August, when a new scheme may be in place). 4k shares may be sold pre-IPO, while at least 1k shares will be reserved for the IPO and sold on the open GLBSE market to the highest bidders. There are 100k shares in total. Since each share represents .0009% profit, that means up to 90% of BDK profit will be sold.

I still don't entirely understand how the offering works.
Until after August 2nd, I will be issuing up to 5,000 shares on the second day of each month. Up to 4,000 of those shares can be pre-purchased early. The remaining 1,000 will be sold on the open market through an ask order at the IPO price I determine before-hand. Nobody's guaranteed to get the 1k shares being offered on GLBSE - they go to the highest bidder at the time I place the ask order.

Why don't you sell all the shares at once and get it over with?
Every time I offer profit shares to the public, equity and (ideally) dividends increase. Each month, this means 4.5% of BDK's profits are more valuable than the previous month's. I'm quite familiar with the effects of compound interest and believe this is the best way to move forward most profitably and fairly. While early adopters will almost certainly be rewarded the most, BDK will, by design, always be growing, and doesn't depreciate in value like mining hardware, so the way I'm doing it, everybody should win. Smiley

What happens if BDK loses money?
The losses will carry over until the "profit balance" is positive. There will be no dividends until the "profit balance" is positive. The operator may choose to eat the losses and not roll over losses, just pay nothing for the week where there are losses, but that is entirely at my discretion.

How much of BDK's funds are invested in Pirate?
None.   Grin

I don't know if you're credible...
Then don't invest. I'm not desperate for your money. BDK is already operational and I appreciate all my investors, but there is certainly no necessity to sell BDK's profits for more funds up-front -- this only accelerates BDK's growth and ability to positively impact the economy. Eventually, I will initiate a buyback (see the provision in the contract for details) and operate without accountability to anyone but myself. Talk to enough people and I believe you'll find I've always stuck to my agreements and try to be generous while leaving very healthy margins for myself. A few people have my ID, but I'd rather not post it publicly.[/b]


June 2012 Net Income Expectations
Optimistic estimate: 85BTC
Reasonable estimate: 50BTC
Pessimistic estimate: 25BTC
(Guesstimated weekly dividend payouts -- June 4th: 0.0BTC/share Actual: 0.0BTC/share, June 11th - .00063BTC/share Actual: 0.00121358BTC/share, June 18th - .00014BTC/share Actual: 0.000406688BTC/share, June 25th - .00036BTC/shareActual: 0.00023112BTC/share)

GLBSE page: https://glbse.com/asset/view/BDK

Update: July 2nd IPO is next up. There will be no market order, but up to 4k units can be purchased up until the end of July 2nd @ .22/unit for anyone interested.

Contract:
Ben Malec (referred to within this contract as "me," "myself," "I," and "operator") will issue 100,000 shares of "BDK Hybrid Instrument." Each share not controlled by the operator represents .0009% of BDK's monthly profit.  Dividends will be paid every Monday, starting May 7th, 2012. Dividends will not be paid on the first of the month unless that happens to be on a Monday. 100,000 shares will be issued. Up to 5,000 shares are to be sold on the second day of each month for four months, starting on the month of May, 2012. After that time, shares may be issued at will of the operator.

Additional provisions
"Operator Equity" - The operator holds all equity of BDK. Shares are not tied to equity, and represent only .0009% of BDK monthly profits.

"Shareholder Votes, Non-binding Motions" - While motions may be introduced, they are non-binding. They exist only so the operator may gauge opinion of those invested in BDK's success.

"Change of Contract" - The operator is fully permitted to change the contract at will, without consent of shareholders. However, the modified contract is not permitted to go into effect until sixty days after the changes are made public. When the contract is changed, the operator will honor the ability for shareholders to sell shares back to him at a price of .125 Bitcoins per share between the time a change is made and the time 60 days have elapsed since the change was made public.

"Buyback" - At any time, the operator is permitted to buy back shares issued. The operator will pay .64 Bitcoins per share if the operator buys back BDK shares prior to August 3rd, 2012. If August 3rd, 2012 or later, the operator will pay ((.32 Bitcoins + GLBSE 5 day weighted average of trade transaction amount per share of BDK shares)/2)

"Share Value Protection" - If shares trade for less than ฿.01 on GLBSE for at least 168 hours continuously, the operator MUST issue a bid order of ฿.05 in an amount which equals 50% of shares issued not controlled by the operator. The "168-hour timer" does not again reset for 26 weeks after the "Share Value Protection" provision was last called to action.

"Negative Equity and Operator Liability" - BDK is permitted to operate while having negative equity so long as BDK has not had negative equity for 90 consecutive days. On the 90th day of having negative equity, the operator will be held personally liable to pay shareholders $.10/share (or ฿.02/share, whichever value is lesser). In cases where BDK is unable to achieve due to reasons unrelated to BDK experiencing prolonged negative equity (operator experiencing imprisonment, debilitating illness, GLBSE being hacked and made unusable, EMP strikes, police raid, or death, for example), the operator is not liable.

"IPO Value Preservation, Operator Trading" - The operator is not permitted to ever sell shares for less than he previously sold them for. However, he may sell shares for an amount equal to or greater than the amount he previously sold them for at will.

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BinaryMage
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April 20, 2012, 12:57:01 AM
 #2

Oh dear, no insurance for EMP strikes...

What have monthly profits been / what do you expect them to be?

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April 20, 2012, 01:19:48 AM
 #3

Oh dear, no insurance for EMP strikes...

What have monthly profits been / what do you expect them to be?
You can see in detail @ https://docs.google.com/spreadsheet/pub?key=0Ao892S4MOoDZdGZSbjJVd1ZTbFVLZE5aRE95bE91NVE&output=html


%RoE for January (first month of operation) was .22%
%RoE for Feb - .58%
%RoE for Mar - 2.39%
Q1 %RoE - 3.41% (~77.34BTC profits, but with average equity of ~2.25k -- also hadn't begun accepting a large quantity of deposits, yet)
%RoE for April (through the 19th -- should be significantly higher by end of month, and this month saw bad loan write-offs of 84BTC) - 3.6% (~110BTC profits so far)


I believe %RoE for May will be between 7.5% and 10% (possibly lower depending on how quickly I can reinvest capital brought in by this IPO offering), with profits of ~350-400BTC. May should be the month BDK really hits its stride, and I believe %RoE will consistently be ~7.5-10% per month after that. Monthly profits should consistently increase with time as IPOs are put out and profits reinvested. Early purchasers have two fantastic advantages. 1) I will never issue IPO shares for less than I previously issued them. 2) Capital raised from future IPOs can only increase profit potential for earlier shares.


For example:
You buy 5k shares for 250BTC today, owning 4.5% of BDK monthly profits. That 250BTC is immediately invested, and should show returns in ~ a month. We'll say that increases monthly profits from 400BTC to 425BTC.

Someone else buys 5k shares for 300BTC in a month, owning 4.5% of BDK monthly profits -- you still own 4.5% of BDK monthly profits, remember - that didn't devalue. Now, on top of the 25BTC in extra monthly profits your investment brought in, the other person buying 4.5% monthly BDK profits for 300BTC allows for an additional 30BTC of monthly profit for BDK. That 30BTC of profits translates to 1.35BTC increased monthly dividends for you.

This continues on, with BDK shares becoming more expensive and resulting in greater dividends for shareholders.

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April 20, 2012, 02:51:47 AM
 #4

1k of pre-IPO shares remain. Thanks to Nefario & GLBSE team for helping me along the way, answering questions and fixing my screw-ups.  Smiley

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April 20, 2012, 03:01:28 AM
 #5

That was nice and fast. Maybe I under-priced?  Cheesy


No pre-IPO shares remain unreserved. Remaining 1k shares will be sold @ .055BTC each on May 2nd. After that, 95k shares will remain to be issued at a later time, with the next public offering of 5k shares occurring on June 2nd at a price I haven't figured, yet.

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April 20, 2012, 03:16:27 AM
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That was nice and fast. Maybe I under-priced?  Cheesy
It's probably better to underprice them initially, especially when you are selling only a small amount. It helps build demand and allows the market to price the shares for future offerings.

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April 20, 2012, 03:25:57 AM
 #7

That was nice and fast. Maybe I under-priced?  Cheesy
It's probably better to underprice them initially, especially when you are selling only a small amount. It helps build demand and allows the market to price the shares for future offerings.
On a related note - those who have already paid and received their shares may of course sell them on GLBSE for whatever they please. While I won't use the going rate on GLBSE to price the 1k shares on May 2nd, I'll definitely keep it in mind when pricing the June shares.

Thanks again, everyone. I couldn't be more pleased with the interest in what I thought was overly-complicated, kludgy, and included a disclaimer that I'm not liable in case of EMP strikes disabling me from allowing BDK to function and pay out as intended.

ETA: Nefario said he'd get around to verifying my identity some time after he wakes up tomorrow (today, for him -- works into the wee hours of the morning improving GLBSE, and the upcoming facelift looks pretty darn slick), fwiw. He already has my ID and a utility bill which he checked out during the spat with Goat.

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April 20, 2012, 04:15:47 AM
 #8

Hm. Since this isn't really clear in the contract -- for reference, the IPO will be an askwall for 1k shares at .055BTC. There's already a bid on GLBSE for more than that.

I'm fairly sure it's not possible to sell the shares for less than that using GLBSE (even if I wanted to). So, while I may end up selling the IPO shares for more than .055BTC due to how GLBSE works, understand I only count the 1k shares as being sold for .055BTC when pricing future IPO shares. For example, if there were some wingnut bid of .5BTC/share and that's what I ended up selling the 1k BDK shares at that during the IPO even though I put the sell price at .055BTC, that doesn't restrict me to selling future IPO shares for only .5BTC or more in the future.

Just wanted to make sure that was clear before the IPO occurs. If any current shareholders are annoyed by that for some reason, feel free to sell your shares back to me for what you paid any time prior to May 2nd.  Grin

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April 20, 2012, 04:21:06 AM
 #9

On a related note - those who have already paid and received their shares may of course sell them on GLBSE for whatever they please. While I won't use the going rate on GLBSE to price the 1k shares on May 2nd, I'll definitely keep it in mind when pricing the June shares.
So I presume you'll do it like the gigamining IPO and just add a sell order for 1k at 0.055, but if there are bids above that amount the shares will be sold for the higher amount.

Will you still use 0.055 as your highest "IPO value preservation" price? FWIW, I think you'd be entitled to, since that is the price you are willing to sell for. Just thinking out loud.

Edit: Answered in post above while I was drafting this post.

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April 21, 2012, 01:12:15 AM
 #10

ID now verified. There seems to be a small problem with share transfers, perhaps because I had the IPO date changed to allow for pre-IPO transfers. Hopefully Nef can figure this out for me when he's up and about.

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April 21, 2012, 02:31:21 AM
 #11

ID now verified. There seems to be a small problem with share transfers, perhaps because I had the IPO date changed to allow for pre-IPO transfers. Hopefully Nef can figure this out for me when he's up and about.
Resolved speedily thanks to Nef. Shareholders should now be able to sell their pre-IPO shares should they choose to do so.


Cheers,

Ben

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April 21, 2012, 07:50:42 AM
 #12

I would like to take a moment to point out (to everyone's delight, no doubt) that since the MPOE and subsequent MPEx issues of nonvoting shares on large float everyone's doing nonvoting shares on large float (as opposed to the previously employed nonsensical if idealistic GBLSE method of voting shares, tiny float).

This is a good and welcome thing for a number of reasons that apparently either nobody felt equal to the task of discussing or nobody was too curious about.

We will obviously continue to lead the community by freely providing competence and insight into how securities markets actually work. Perhaps the greatest advantage of bitcoin for the "next door" demographic is that they get to interact directly with people they would not otherwise have met in a million years (gross estimate).

My Credentials  | THE BTC Stock Exchange | I have my very own anthology! | Use bitcointa.lk, it's like this one but better.
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April 22, 2012, 02:28:38 AM
 #13

(posted for the sake of disclosure -- these are not counted as gains or losses until time of sale, but changes the amount of assets BDK has -- I'll post this every week or two)

GLBSE Securities Re-valuation (reconciliation between BDK sheets & GLBSE):
TyGrr: BDK - 2BTC/share, GLBSE - 2BTC/share -- No Change
Cognitive: BDK - .69BTC/share, GLBSE - .63BTC/share -- total loss of 16.14BTC on paper
Gigamining: BDK - 1.5BTC/share, GLBSE - 1.55BTC/share -- total gain of .65BTC on paper


Total change in assets (on paper only) due to change in GLBSE asset valuation = -15.49



I also noticed someone paid .5BTC/share for 5 shares of BDK on GLBSE today. Just a quick reminder that IPO shares will sell for .055BTC.

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April 22, 2012, 04:35:20 AM
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I also noticed someone paid .5BTC/share for 5 shares of BDK on GLBSE today. Just a quick reminder that IPO shares will sell for .055BTC.

While they may be priced at .055 in theory, I suspect they'll sell for much higher at the IPO given the limited number of shares available for those who weren't able to put up 250 BTC in the pre-IPO.
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April 23, 2012, 07:31:25 AM
 #15

Decided to go about this much more conservatively. The sales of profits (until ~.32BTC/share) don't really help me boost my personal profits, and I don't need money to the extent where I'm willing to gather it at a loss of personal income. I think BDK can reach .32BTC/share much more quickly with an extremely conservative, slow release of shares. I now intend to release 2k shares on the second of each month (instead of 5k/month), and not sell shares pre-IPO. After the four scheduled public offerings (May 2nd, June 2nd, July 2nd, August 2nd), I'm thinking I will sell 2k shares every two months until 2013. At that point, 2k shares will be sold every three months. 2014, 2k shares every four months. Depending on how this works out, it's possible shareholders will not receive as much increase in dividends as they perhaps expected short-term and mid-term, but I believe this will dramatically reduce the possibility of stagnation, and long-term, will result in dramatically higher dividends/share than it would've if I proceeded as I outlined in the OP. Once the share price of BDK surpasses .32BTC/share, I will re-evaluate.

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April 23, 2012, 10:12:20 AM
 #16

I'm okay with this. Also next month, why not have the price start at .32?
I'll push out what I think the market will take. The last thing I want is a public offering where an ask order just sits around on GLBSE. I'm currently leaning toward (and given the first IPO hasn't even occurred, this is pretty meaningless) .1BTC/share next month. If the market thinks I've undervalued the shares, they can bid higher for them prior to the shares being sold. Eliminating pre-IPO shares gives "the market" a much more powerful megaphone, and investors more power in determining what they think the shares should be valued at compared to a number I whip out just because it'd be an amount where I break even with regards to how much I'll receive in income monthly. While personally making a profit through these public offerings is a goal I have no interest in not achieving, I don't think it'd be nearly as cool as controlling where >40k BTC goes.

Right now, the "business loan" group I arranged only guarantees each lender brings 200BTC to the table. They can have more cash-on-hand they're willing to invest, but requiring they have more than 200BTC becomes exclusionary and counter-productive at this time. The amount presented for "business-grade" loans is probably fine for someone whose project only needs to hire a developer for a couple months, or start up some type of gambling website, and I think having an organization where we do larger non-consumer loans is a big step in the right direction - but for someone seeking to produce something physical or complicated, it will barely even make a dent in purchasing specialized manufacturing equipment, or, say, hiring a few salaried CSR employees. With >$200k in equity, there are a lot of exciting opportunities I expect to be presented. Ultimately, there's no reason I need the money right now. As far as I'm aware, no producers currently need larger loans than a few hundred BTC -- nobody's applied for a for what I'm charitably calling a business-grade loan. It's consumer loans, loans (or investment) for bot-feeding, or mining, which are all investments which scale well if you invest just a tiny amount, or a very large amount. There aren't really any significant barriers to entry from capital requirements, except ASIC development and perhaps sophisticated trading bots.

Maybe there are no promising ideas in the Bitcoin community requiring funding. I don't believe that. I believe there isn't enough money available to them on reasonable terms to make their ideas viable (or at least, not viable to be done using BTC for funding), and I think pooling community resources (and lending/investment risks) will make BTC lending to businesses more practical, and create some truly outstanding products in the future.


ETA: Sorry, went a bit O/T in response. There's a finite % of profit which can be sold off. Once the 100k shares are sold, the only way it can grow beyond is with the 10% cut I'll have remaining or through initiating a buyback, then re-selling at a later time. It's a large commitment, and while I don't want to "give away" my income for it, what I want much more is unimpeded upward momentum. If I post 2k shares one month and they just sit there - per the "IPO value preservation" provision in the contract, that's pretty much it. If I issue more shares, they'll have to just sit there with the others. There is an extreme disincentive from the contract and nature of this offering against letting BDK shares stagnate. I may be taking losses of personal income toward the start, but being able to continue raising funds, IMO, is much more important. Because of the way the contract and offering is designed, I think there's an almost unreasonable lack of risk for investors, as BDK itself will only grow through these. Long-term, I believe the conservative, patience-demanding way the public offerings are implemented will provide BDK with dramatically more funds in the end versus trying to meet my own personal income goals.


ETA: motion created regarding the issue of selling 2k/month vs. 5k/month. 2 motions will be introduced ~ a week prior to future public offerings to help me determine what shareholders want me to price BDK shares at. One motion will be to issue at a conservative price. One motion will be to issue at a more aggressive price.

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April 23, 2012, 07:22:15 PM
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I would like to take a moment to point out (to everyone's delight, no doubt) that since the MPOE and subsequent MPEx issues of nonvoting shares on large float everyone's doing nonvoting shares on large float (as opposed to the previously employed nonsensical if idealistic GBLSE method of voting shares, tiny float).

This is a good and welcome thing for a number of reasons that apparently either nobody felt equal to the task of discussing or nobody was too curious about.

We will obviously continue to lead the community by freely providing competence and insight into how securities markets actually work. Perhaps the greatest advantage of bitcoin for the "next door" demographic is that they get to interact directly with people they would not otherwise have met in a million years (gross estimate).

I would like to take a moment to point out  (to everyone's delight, no doubt) that I provided some advice to Kluge on different classes of shares and alternative rights that might attach to those classes (I am a qualified professional in this area).  I have been structuring businesses for much longer than bitcoin has been in existence, and non-voting shares and stock exchange issues have been around for more than 100 years (too lazy to actually look up when it started).  MOPE and MPEx have nothing to do with it.
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April 23, 2012, 08:30:33 PM
 #18

I would like to take a moment to point out  (to everyone's delight, no doubt) that I provided some advice to Kluge on different classes of shares and alternative rights that might attach to those classes (I am a qualified professional in this area).  I have been structuring businesses for much longer than bitcoin has been in existence, and non-voting shares and stock exchange issues have been around for more than 100 years (too lazy to actually look up when it started).  MOPE and MPEx have nothing to do with it.

I would be glad to hear your insights Patrick.
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April 26, 2012, 01:26:16 PM
 #19

Less than a week to go until 1k IPO shares are sold. My final decision on IPO shares is to go even more conservatively and not slate any public offering dates in the future, but simply to sell when I feel the price is high enough to justify it. I think this will allow me to distribute dividends enough where people are better-aware of what the value of these shares are. Already, I think there will be enough of a market where share-holders are comfortable with the trading volume (keeping in mind all share sales are still pre-IPO shares released in the last few days). I will alert everyone to sales after the trade has gone through. There will still be 1k shares sold on May 2nd. After that, no more are set to occur at any particular time, and they will not occur at any particular price, except at a price higher than previously sold.

[09:12] <`MBot> [ GLBSE ] [ TICKER ] [ BDK ] [ BID: 0.066 ] [ ASK: 0.067 ] [ SPREAD : 0.001 ] [ LAST TRADE: 395@0.066 ] [ VOLUME : 87.357 BTC ]



The essence of how early adopters are rewarded is as follows: Assume BDK currently has 3k of equity and I make 10% profit on equity, so the monthly profit expectation would be 300BTC. Let's say I sell 4.5% of profits @ 250BTC. Now, BDK has 3.25k of equity, and the monthly profit expectation would be 325BTC. June 1st rolls around and the dividends on 4.5% of profits (assuming 10% of BDK equity is profit) is 13.5BTC. Let's say I then sell another 4.5% of BDK's monthly profits (5k shares), this time for 500BTC. These people will pay more because BDK is now effectively worth more -- maybe not 2x as much as the first shareholders paid, but certainly more. Now, previous shareholders who bought 4.5% of profits for 250BTC still hold 4.5% of BDK's monthly profits - that percentage doesn't get diluted by future public offerings - but BDK equity has increased to 3.75k (more if you include growth due to dividends on shares I haven't sold and didn't use for personal expenditure), resulting in 375BTC of monthly profits. Now, 4.5% of monthly profits is 16.875BTC. Keep going and going, and you can imagine how incredibly high shareholder dividends can be. This has been over-simplified for the sake of explanation, but I hope it gives potential shareholders a better understanding of how this is intended to work if I don't screw it up.

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April 26, 2012, 09:42:38 PM
 #20

exact time of the ipo? thanks
Idunno... 5pm US Eastern.

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