Split from the [GLBSE:NASTY] NastyMining
. This is what usagi
posted, I thought it was interesting and warranted its own thread.
An issue which takes care of it's investor's money will be very popular.
Could you elaborate on this?
Let's say you see a mining share that represents 1 mhash/share and is valued at 0.25. Maybe you buy it, maybe you don't. Let's say the company has 1000 shares.
Next week you hear news that a new BFL single has finally arrived, and they have issued precisely 440 new shares, at 0.25, to pay for it. However these new shares represent almost 2mhash/share. A share in this company now contains about 1.27mhash/share. Would you race to buy it at 0.25? Yes, you would. So the stock price goes up. This has two important benefits for the company; 1. their new fundraising is immediately successful, and 2. everyone who invested in the company is happy and more likely to support future expansion and give management some leeway. Management is much more likely to do this when they own the company so one of the big things you look for when investing is management/insider ownership. Sadly too many of the companies around here just sell bonds with no interest in the hardware so the operators can get a free lunch. They have no concept of what it means to list on a stock exchange, get equity, look after shareholder value, and run a proper company. I know that's a bit harsh but look around and see for yourself whether what I am saying is true.
With BMF, for example, my strategy is to support the NAV out of management fees. This means I make nothing from running BMF. But if I can push the net asset value over 1.05 or 1.1, I believe people will rush into BMF at 1 bitcoin, because it represents a good underlying value. Then, in about a year, after I have finished building my company after blood sweat and tears, will I allow myself to finally sit back on my personal shares and make a small profit.
Other issues don't seem to see it this way. Some other issues (some, not all) don't have a clear understanding of how stock markets work. Some don't even understand the concept of shareholder value. One issuer I have been speaking at with length has told me "share price means nothing". This same issuer has run his company into the ground, trading away the equity of his company to sell more and more shares. This strategy is beginning to hit a wall as his share price approaches zero. He doesn't realize it yet, but he won't be able to back away from these types of trades -- as people only traded with him on the way down since he was essentially giving away his shareholder's equity.
Another kind of problem is the "discount shares" problem. A private placement is supposed to be for a significant amount of money, and usually has a no-sale clause of 6 months to three years. Right now I can go to almost any miner and get 10% off for as little as 200 BTC. Then sell into the bid for an immediate profit. Who wins here? This poisons the market and upsets the share price. Recently you have seen this on quite a few new issues and expansions, where shares were sold at up to 30% off the bid. I don't understand why people do this. First, when the shares are all eventually sold, the issuer suffers because he has less money coming into his company. Second, it destroys the confidence of investors making it more difficult to raise money in the future. It reeks of bad management.
When people expand they're supposed to, at some point, be able to do it out of their company's profits. Ultimately a company which must return to the market time and time again and never provides any accretive value for shareholders, is a very poorly run company. The idea of "mining bonds" has to be revisited here. These are not bonds, they're shares with a fixed dividend. A bond is a paper security which represents a loan. Once people begin to wake up and smell the toast burning, I personally feel the current concept of "mining bonds" will disappear in a puff of smoke. You can already see it with the influx of new non-deterministic mining companies which promise to accrete value. That's my take on it. Just my opinion.tl;dr: For asset issuers, preserving shareholders' trust is more important than shortsightedly attaining benefits from the arbitrary sale of shares.
Note: Just for clarification, the tl;dr is my words, not usagi's.
What is your opinion on this?