Could someone please explain something simple to me....I don't get the share/dividend pricing.
Please correct where I'm wrong:
I pay BTC2.5 or BTC3 a share and I will get BTC0.03 in dividends week?
If so if my math is correct it will take me a year and a half to break even if the share price remains at ~BTC0.03? Or is it possible the share price will hit BTC0.5?
Is this a long term investment plan and am I being too short sighted?
Thanks!
Well, you are forgetting that your share entitles you to dividends in perpetuity. These dividends are based on mining output of a growing mining operation, and hardware sales. Assuming that AM can keep expanding their mining farm, and keep up with the growing network, and that they remain competitive in releasing new mining HW for sale (and use themselves), then the share price will largely remain firm, and likely rise. As long as the price + all dividends you have received is higher than the price you paid, you are at break even, or profitable.
If they can not keep up, then we don't know where the share price will end up. (on the downside). It does however get ugly fast and 0.5 could be quite possible. I do not consider this a likely scenario however, because Friedcat has exceeded almost all overall expectations of investors to date.
According to my most favorable long term valuation estimations, a share price of 5.75btc has about a 25% chance of happening.
For this to happen two things would have to occur.
1) ASICMINER can keep paying on average at least 0.015 btc dividends per week. To do this they would need to maintain about 15% of the network over the long term. If they drop below 15% they could make up for it in increased HW sales. This rate is lower than their current average income generation, so I am arbitrarily putting a 50% probability on them being able to do this.
2) People would have to accept lower annual yields. I am estimating ~13% as a reasonable APY for a consistently delivering BTC stock, that has strong management and a long term consistent track record. (As time goes on and Asicminer delivers consistently on point #1, I expect the trust the community places in them will continue to grow. I give this a 50% probability as well.
Of course only time will tell if Asicminer can deliver, and if they do whether the market recognizes them as a BTC "Blue Chip" and adjusts it's valuation and expectations accordingly.
I would have posted this in speculation, however, I think since a) the question wasn't in speculation and b) it's more of an "investment/valuation" question, I feel it's ok to respond in this thread.
Two things my simplistic model does not take into account are revenue from transactions, and block award dropping, as we have no way to know if these won't just cancel each other out.
EDIT: Adding some other really rough and ballpark scenarios:
25% - AM is overcome by the competition and downward price spiral begins: Price could fall very far.
40% - AM struggles a bit but largely stays competitive but doesn't maintain clear leadership: price probably remains in the 2-3.5btc range
10% - AM does what I said above and market doesn't give them a strong valuation: 3.5-5.5btc range.
25% - AM does what I said above and market recognizes them as leader: price could go as high as 5.75btc
-helixone
