Diablo Mining Company

[Bitcoin Oz]

The real problem is fixed mh/s mining bonds. They are the worst wealth destroyers Ive ever seen. Youd be better off investing your money in hookers and blow at least you would get something out of getting "screwed"

Correct with assett backed mining you should get almost 100% of the USD value of your investment back, under any circumstances, even if USD/BTC and difficulty rise sharply.

No you just lose less as you can still sell the gear on the second hand market. With bonds you dont even get this.

I used to be in a mining company so i know what happens when the difficulty outpaces the ability to grow the mining cluster any further and its not pretty.

It goes like this -
Mining company that grows to keep up with or outpace difficulty = good
Mining company that doesnt grow = bad.
Fixed mh/s mining bond= worst.

Thats just been my experience the last 12 months to 2 years there is no trolling involved 

[Puppet]

You are an idiot.

Next!

I see you found an excuse to ignore pertinent questions, pretending to be insulted by an ad hominem. However, its merely a statement of fact:

"6: I'm well aware of how markets work, I'm not going to bid up (or pay too high a price) for the bitcoin miners after the IPO just to get my hands on their shares. If I did that the NAV would fall after the IPO because I'm an idiot of a trader. I wish to avoid that at all costs."

https://bitcointalk.org/index.php?topic=81993.0

You did precisely that and burnt 40% of your investors money (probably closer to 80% if they actually wanted to get out). So you are an idiot, get over it. With that established, lets get back to the topic at hand:


no company pays its CEO 20% of its REVENUE. Particularly not when 99% that "revenue" is insufficient compensation for the eroding value of the company assets. Its like putting $10K in a fund and drawing $1K from it each month and calling it "revenue".

Under your contract, Diablo would be entitled to 20% of those monthly payments. Do it a few times, by putting the coupon payments back in to a fund (or mining bond) and after some time Diablo ends up with virtually 100% of the company's assets. Idiotic is too mild a term to describe this.

[EskimoBob]

In a suprising turn of events, Diablo-D3 has agreed to hire me, usagi, as his representative in this issue.

I will speak on behalf of Diablo-D3 and represent him in this issue. My fee is 5 btc. Diablo has expressly authorized me to field all questions on behalf of the GLBSE, investors, and the public on this issue.

We are issuing a statement: Things have gotten blown out of proportion. Everyone wants what is best for DMC and for investors. Therefore we are prepared to make an offer. The DMC contract will be modified as follows:

1. Diablo-D3 will modify his contract to state his business plan:
a) Buying shares of mining issues on GLBSE.
b) Buying hardware (when appropriate) for the datacenter.
c) Buying solar power (possibly before mining hardware) and possibly reselling solar power into the grid should surplus exist.
d) Selling dedicated hosting/web hosting if there is spare datacenter capacity
e) Other sources of income, from time to time, to be passed through shareholder approval via binding motion.

2. Seeing as how if the business he runs can't exist if it can't pay him a reasonable amount, the dividend structure will be changed as follows:
a) Out of all the money DMC recieves as income (excluding sale of shares), Diablo will recieve 20%.
b) The remaining 80% will be used to cover operational expenses.
c) Of the money remaining after operating expenses, half will be paid as dividend each month, and
d) the remainder will be used to expand and grow the company.

3. Diablo-D3 will hire smickles of S2 capital management to do accounting for DMC (effective immediately).

This simple 3-step plan shows that Diablo-D3 is competent enough to manage DMC and is the best person for the job.

I will be speaking with Nefario immediately to vet this and see if we can't turn this situation around.

I propose something along those lines:

a) DMC acting manager will receive monthly bonus of 20% from the net income (excluding sale of shares). Bonus will be paid out only if NAV for the period (previous month) has risen over N%.
(feel free to correct the grammar, I am not a native English speaker)
What is the reasonable N%? 1%?

What I also like to see is a growing reserve fund in BTC. If there is nothing good to invest in, sitting on BTC is better than wasting it on questionable investments.

[makomk]

As far as I gather he has made investments that take time to mature rather then let money sit. I think it's rational... I don't know maybe I am missing something. The part where investors are trying to stamp him into ground rather than try to get what is going on with his vision is what kills me.

No. He's made investments in mining bonds which are, for the most part, pretty much guaranteed to lose value over time and may even lose value at a greater rate than they pay out dividends. usagi's proposal involves giving him a fixed 20% of the revenue from everything - including those mining bonds - effectively incentivizing him to invest in bonds that are guaranteed to wipe out shareholder value rather than making investments that will actually grow. (Also, he's diluted the holdings of existing shareholders massively by trading newly-created DMC shares for shares in other GLBSE assets at ratios which severly undervalue the DMC shares.)

[deeplink]

People who are stating that "no business pays it's employees out of gross" have not thought through how this system will work. The basic idea is that if the company does not make money, management does not get paid -- that is common knowledge.

However, if case of your proposal, if the company does not make money, Diablo does get paid, because he gets 20% of income, regardless of expenses. Profit = income minus expenses. The fair way to do this is pay Diablo X % of profit, not income.

I have thought this through and come to the same conclusion as people who object to the proposal. Your reasoning is flawed or at least very vague.

[Puppet]

That's an interesting perspective, and I will pass it by Nefario, but we will be sticking with the plan as stated for now -- no matter how you slice it, if a business cannot afford to pay the employees, it cannot afford to operate. Plus if you think it through, expenses are just not going to be 80% of the company. I would be personally surprised if they ever went over 20% for a project like this. The plan itself is brilliant -- solar power (and reselling into the grid) and selling spare capacity in the form of web hosting and dedicated servers.

There will be plenty of time to sell or buy shares if you disagree with this plan. Right now 20% gross will be less than $40 a week after exchange rates and there are no expenses other than trading fees. There will be zero gain or loss to company cashflow because of this until we start to get up into the $100k - $200k range. You will have plenty of time to buy in or sell out by then. Simply put you are welcome to disagree and not invest -- this is not about making DMC appeal to every investor.

This is, and only is, about making DMC a transparent, stable company, and guaranteeing the trust placed in Diablo. That's it.

How exactly does this "guarantee trust placed in Diablo"? Diablo is indeed on trial by shareholders for gross incompetence and mismanagement, and for obliterating shareholder value, and you think giving him 20% of every trade is the solution? I think not.

And I also think you have no say in this, or at least no more than the amount of shares your 50 BTC investment would entitle you to. Diablo breaching his contract and giving you thousands of shares, so you can vote in his favor has fraud written all over it.

[Puppet]

The "do not invest" excuse might fly, if this contract was drafted before people bought shares. Guess what.. THEY ALREADY DID. And
And now you and DIablo consipire to alter the contract post factum to rob those investors of what little equity they have left.

If you really want to implement the most stupid contract ever, go ahead, but liquidate the company first or buy the existing investors out for a price they agree to. Anything less is breach of contract and fraud, plain and simple.

[bitcoinbear]

The "do not invest" excuse might fly, if this contract was drafted before people bought shares. Guess what.. THEY ALREADY DID. And
And now you and DIablo consipire to alter the contract post factum to rob those investors of what little equity they have left.

If you really want to implement the most stupid contract ever, go ahead, but liquidate the company first or buy the existing investors out for a price they agree to. Anything less is breach of contract and fraud, plain and simple.

I think it would be reasonable for Usagi and Diablo to offer to buy shares back from anybody who does not approve the contract change at the original IPO price.

[Puppet]

The "do not invest" excuse might fly, if this contract was drafted before people bought shares. Guess what.. THEY ALREADY DID. And
And now you and DIablo consipire to alter the contract post factum to rob those investors of what little equity they have left.

If you really want to implement the most stupid contract ever, go ahead, but liquidate the company first or buy the existing investors out for a price they agree to. Anything less is breach of contract and fraud, plain and simple.

I think it would be reasonable for Usagi and Diablo to offer to buy shares back from anybody who does not approve the contract change at the original IPO price.

+1

[deeplink]

The "do not invest" excuse might fly, if this contract was drafted before people bought shares. Guess what.. THEY ALREADY DID. And
And now you and DIablo consipire to alter the contract post factum to rob those investors of what little equity they have left.

If you really want to implement the most stupid contract ever, go ahead, but liquidate the company first or buy the existing investors out for a price they agree to. Anything less is breach of contract and fraud, plain and simple.

I think it would be reasonable for Usagi and Diablo to offer to buy shares back from anybody who does not approve the contract change at the original IPO price.

+2

[nebulus]

I think it would be reasonable for Usagi and Diablo to offer to buy shares back from anybody who does not approve the contract change at the original IPO price.

Yes, do that! Black Friday, GLBSE everyone!!!

[Deprived]

I am now a shareholder of DMC (I'm happy for nefario to confirm this if anyone doesn't believe me).

I'm not going to get back into long discussions about this.  I am, however, going to assert one right and make one firm request as a sahre-holder.

1.  My contract as a share-holder is between myself and DMC.  Other share-holders (and Diablo) may raise and and vote on whatever motions they like BUT they have no right to amend the terms of MY contract.  There is no provision in the contract for amending it.  The contract spells out how funds are divided and the uses to which they may put - those particulars are inviolate.  If a majority of shareholders in DMC would like to enter into a new (revised) contract with Diablo then you have two options:

a) Have him form a new company into which you invest.
b) Make an offer to myself and other share-holders who disagree such that we will sell our shares to you.

The ONLY way DMC's contract can be changed (and it remain DMC) is if EVERY shareholder agrees to sign the new contract - there is no provision in the contract, in law or in common business practice for one group of people (e.g. share-holders) to be able to vote away the rights (as defined in a contract) of others.

2.  Diablo is being investigated for imcompetence and/or scamming.  I don't know who initiated that investigation (made the complaint) nor do I know the specifics of it.  As a share-holder I request that the investigation be completed and its results made public before any other action occurs.

[Factory]

As his representative I want to assure you that this contract amendment was carefully reviewed and discussed with many people and there is a very deep reason for each and every statement it contains.

It may have been discussed with many people, but it is very clear that none of them have any knowledge of business or finance in any kind of serious capacity.

The basic idea is that if the company does not make money, management does not get paid -- that is common knowledge.

Except that you worded the contract in such a way that he is being paid from revenue, and not from earnings. This is an egregious error on the part of everyone who wrote and "carefully reviewed and discussed" the contract.

Plus if you think it through, expenses are just not going to be 80% of the company. I would be personally surprised if they ever went over 20% for a project like this.

You honestly believe that all of DMC's business activities can operate with a 80%+ net margin? That is completely outlandish.

What do you mean you would be surprised if they went over 20%? They will always go over 20% as long as DMC is operating.

DMC net income formula as per amended contract
i= r - (.2r) - e

i = operating/net income, ie. earnings
r = revenue/gross income
e = all liabilities/operating costs (excluding Diablo)

If e > 0, then net margin < 80%. You should not be surprised if expenses were over 20%, you should actually be expecting it.

For one thing, anyone who complains that Diablo is getting paid too much money hasn't thought through how much 20% of revenue is. It's not very much. A million dollar data center might make $250k gross a year. What's 20% of that? $50,000.

You are talking gross income though, not operating income.

Consider this:

Scenario 1.

$250,000 gross income.
20% of gross income goes to Daiblo, $50,000.
Then operating expenses are paid. Lets say they are $50,000.
$150,000 is left as operating income. That is a net margin of 60%

So DMC retained $150,000 and Diablo was paid $50,000.

3:1 ratio. Payment to Diablo seems a bit high.
Scenario 2.

$250,000 gross income.
20% of gross income goes to Daiblo, $50,000.
Then operating expenses are paid. Lets say they are $100,000.
$100,000 is left as operating income. That is a net margin of 40%

So DMC retained $100,000 and Diablo was paid $50,000.

2:1 ratio. Payment to Diablo seems quite high.

Scenario 3.

$250,000 gross income.
20% of gross income goes to Daiblo, $50,000.
Then operating expenses are paid. Lets say they are $150,000.
$50,000 is left as operating income. That is a net margin of 20%

So DMC retained $50,000 and Diablo was paid $50,000.

1:1 ratio. Payment to Diablo is extremely high.

Scenario 4.

$250,000 gross income.
20% of gross income goes to Daiblo, $50,000.
Then operating expenses are paid. Lets say they are $200,000.
$0 is left as operating income. That is a net margin of 0%

So DMC retained $0 and Diablo was paid $50,000.

0:1 ratio. Payment to Diablo is infinitely more than what DMC actually makes now.

Scenario 5.

$250,000 gross income.
20% of gross income goes to Daiblo, $50,000.
Then operating expenses are paid. Lets say they are $250,000.
$50,000 is left as operating income.

So DMC lost $50,000 and Diablo was paid $50,000.

-1:1 ratio. Payment to Diablo is extremely high.

Do you see the issue here?

Compare those scenarios to the following:

Imagine Diablo is paid 20% of operating income instead of 20% of gross income.

Scenario 1.

$250,000 gross income.
The operating expenses (excluding Diablo) are paid. Lets say they are $50,000.
$200,000 is remains.
Diablo is paid 20%, $40,000.
$160,000 remains as operating income for DMC and it's shareholders.

So DMC retained $160,000 and Diablo was paid $40,000.

4:1 ratio. Balanced. Diablo is paid based on how much the company actually earns.

Scenario 2.

$250,000 gross income.
The operating expenses (excluding Diablo) are paid. Lets say they are $100,000.
$150,000 is remains.
Diablo is paid 20%, $30,000.
$120,000 remains as operating income for DMC and it's shareholders.

So DMC retained $120,000 and Diablo was paid $30,000.

4:1 ratio. Balanced. Diablo is paid based on how much the company actually earns.

Scenario 3.

$250,000 gross income.
The operating expenses (excluding Diablo) are paid. Lets say they are $150,000.
$100,000 is remains.
Diablo is paid 20%, $20,000.
$80,000 remains as operating income for DMC and it's shareholders.

So DMC retained $80,000 and Diablo was paid $20,000.

4:1 ratio. Balanced. Diablo is paid based on how much the company actually earns.

Scenario 4.

$250,000 gross income.
The operating expenses (excluding Diablo) are paid. Lets say they are $200,000.
$50,000 is remains.
Diablo is paid 20%, $10,000.
$40,000 remains as operating income for DMC and it's shareholders.

So DMC retained $40,000 and Diablo was paid $10,000.

4:1 ratio. Balanced. Diablo is paid based on how much the company actually earns.

Scenario 5.

$250,000 gross income.
The operating expenses (excluding Diablo) are paid. Lets say they are $250,000.
$0 is remains.
Diablo is paid 20%, $0.
$0 remains as operating income for DMC and it's shareholders.

So DMC retained $0 and Diablo was paid $0.

1:1 ratio. Balanced. Diablo is paid based on how much the company actually earns.


I am not saying 20% is a fair or unfair rate. What I am saying is that paying Diablo a % of gross income instead of a % of operating income is grossly inappropriate.

The argument that paying him 20% of revenue will be "incentive to perform well" is false. Paying him 20% of revenue is an incentive for him to simply bring in more revenue. That may sound good, but revenue means nothing if you do not control margins and are not mindful of them. Paying him 20% of operating income forces him to operate in a capacity that is beneficial for himself, shareholders, and DMC on a whole.

I apologize for this long post, but I wanted to fully illustrate the problem with the 2a clause of the amendment proposal in the most simple and easy to understand manner.

[novusordo]

The "do not invest" excuse might fly, if this contract was drafted before people bought shares. Guess what.. THEY ALREADY DID. And
And now you and DIablo consipire to alter the contract post factum to rob those investors of what little equity they have left.

If you really want to implement the most stupid contract ever, go ahead, but liquidate the company first or buy the existing investors out for a price they agree to. Anything less is breach of contract and fraud, plain and simple.

I think it would be reasonable for Usagi and Diablo to offer to buy shares back from anybody who does not approve the contract change at the original IPO price.

Yes, buy back my shares at IPO price so that I can turn around and buy a hell of a lot more for market price!

 

On another, more serious note, Factory illustrates a very good point, Usagi. Ignore the obvious troll(s), but please address his point.

[deeplink]

The "do not invest" excuse might fly, if this contract was drafted before people bought shares. Guess what.. THEY ALREADY DID. And
And now you and DIablo consipire to alter the contract post factum to rob those investors of what little equity they have left.

If you really want to implement the most stupid contract ever, go ahead, but liquidate the company first or buy the existing investors out for a price they agree to. Anything less is breach of contract and fraud, plain and simple.

I think it would be reasonable for Usagi and Diablo to offer to buy shares back from anybody who does not approve the contract change at the original IPO price.

+2

-10. Seriously, why are there so many sock puppets here?

Really, no one is fooled by 5-10 "new guys" who all know SOOO much about DMC and "care so much" give it a rest guys, it's seriously embarrassing.

I am not a "new guy" nor a sock puppet. Please drop the drama and the emotional stuff.

As a shareholder I tell you that I do not want to sign the contract you are trying to force me into. You cannot change the contract after the deal.

If you offer an acceptable way out I may consider it. If not I just want to wait for the result of both the audit and Nefario's motion.

[Puppet]

Not sure if you get it or not, but no one's listening.

You seem to be the only one who is not listening.

Are you a shareholder?

Yes. And I bought my shares at market value, I didnt fraudulently receive them like you did.

[Puppet]

You honestly believe that all of DMC's business activities can operate with a 80%+ net margin? That is completely outlandish.

What do you mean you would be surprised if they went over 20%? They will always go over 20% as long as DMC is operating.

DMC net income formula as per amended contract
i= r - (.2r) - e

i = operating/net income, ie. earnings
r = revenue/gross income
e = all liabilities/operating costs (excluding Diablo)

If e > 0, then net margin < 80%. You should not be surprised if expenses were over 20%, you should actually be expecting it.

Its actually much much worse than that, because coupon payments from mining bonds are considered revenue. The value of mining bonds will  perpetually diminish, but Diablo would take the 20% of the coupon payments and not be impacted at all by the diminishing value of the underlying asset. 

Its really like putting  $100K in a bank account and withdrawing x% monthly, the withdrawals obviously reducing the value of the whats in the bank, yet Diablo pocketing 20% of those withdrawls every month as "revenue". You can repeat that game over and over and Diablo would end up with 100% of the company assets, even if he took a smaller percentage, all he needs is an investment vehicle that pays fat coupons but extinguishes itself equally fast. Mining bonds are already pretty good for that though.

[Factory]

Its actually much much worse than that

There are many other concerns and issues that can be talked about. I was choosing to simply focus on explaining why amendment 2a is an inappropriate addition to the contract in terms of compensation and consideration for all parties involved.

[Puppet]

*shrug* If you're a shareholder then vote. I have way more shares than you do. And hey, if you want to reverse the trades we can do that,

Then let us. Lets start by reversing my trade of 0.5 BTC per share.

and I will go back to being the 60% majority shareholder, and then I will raise a motion to do the trade again, and you can go to hell.

You can motion all you want, as Deprived pointed out, it doesnt let you alter the contract, nor does it let you retroactively make contract breaches ok. But thank you for opening the eyes of anyone who still thought you were acting in good faith.The mask just fell off.

BTW, Diablo still has 100K or whatever unsold shares, by your logic, he can do whatever the heck he wants, including raping you after this deal.

This isn't about the trade bro. And as for fraud, you have trouble understanding what the word means. Fraud means an intent to deceive

Which is precisely whats has been going on here. Look no further than the thread title for a good example.

[Deprived]

Not sure if you get it or not, but no one's listening.

You seem to be the only one who is not listening.

Are you a shareholder?

Yes. And I bought my shares at market value, I didnt fraudulently receive them like you did.

*shrug* If you're a shareholder then vote. I have way more shares than you do. And hey, if you want to reverse the trades we can do that, and I will go back to being the 60% majority shareholder, and then I will raise a motion to do the trade again, and you can go to hell. I accepted this trade because it accreted mhash per share. Get it? No? Jesus you're slow.

You can't change the terms of the contract by motion.  Not you can approve any action which would breach the contract. The contract is between Diablo/DMC and each individual shareholder - with the rights/obligations of the contract transferred each time a share changes hands.

Passing motions IS done by voting on motions.  Change of a contract can only be done with the agreement of both parties to the contract.  Motions can't change the contract unless unanimously accepted.

Get it? No? Jesus you're slow.

Here's an explanation you can hopefully understand:

If you have 1000 contracts with someone and I have 1 identical contract with that same party then you can ONLY change your own 1000.  Not my 1.  Shares ARE a contract - their value is determined by the rights/obligations they confer/impose on the parties to that contract.  You can't change the contract of DMC unless you own, control or have the agreement of every single other share-holder.

Whine all you want about it.  Be as dismissive to everyone else as you like.  On this specific point you are totally, 100%, beyond any shadow of a doubt wrong.

If you want a changed contract for DMC you need the agreement of myself, puppet, deeplink etc.  You aren't going about things the right way to get that.