Do you prefer an ICO or an IPO?

[MrEarl]

Hello,

Which do you prefer, an ICO or an IPO, and why ?

Personally, I've mixed views.

An IPO offers the investor shares in the business, and the possibility of being able to influence future decision making at the company. However, IPO's are expensive for the companies raising funds as they usually need to bring in Brokers / Investment Houses etc. They also don't tend to suit the very small investor, given minimum transaction limits, costs as a percentage of a small investment etc.

ICO's do not offer the investor the opportunity to have a share of the business, or influence decision making, but they do in theory offer the investor the opportunity to share in the long term success of the business (subject to the coin being brought into widespread use, with demand for the coin increasing etc.). ICO's suit very small investors, as both transaction costs and minimum investment limits are low. Under normal market conditions, it may also be much simpler and faster to sell a coin, than a share (but in times of crisis, liquidity might quickly dry up in some of the cryptocurrency markets).

As a rule of thumb, cryptocurrency markets are far more volatile than stock markets, but that offers potential for quick gains, not just quick losses.

So, which one do you prefer and why ?

 

[Brendan Burgess]

Hi Mr Earl

That's a bit of an odd comparison and question.

In an Initial Public Offering, there is usually an existing business which is generating profits or has a product which is expected to generate profits. As with any shares, there is a potential to rise or fall, but you are buying something with substance.

In an Initial Coin Offering, if I understand them correctly, you are just buying a bag of hot air. You are hoping that the hype will result in a Bigger Fool coming along and paying more on the secondary market. But eventually, the price of the coin will drop to zero.

Brendan

 

[Gus1970]

In an Initial Coin Offering, if I understand them correctly, you are just buying a bag of hot air. You are hoping that the hype will result in a Bigger Fool coming along and paying more on the secondary market. But eventually, the price of the coin will drop to zero.

Brendan

Hi Brendan, you are confused here, bitcoin is not a ICO, that’s what you call hot air. Utility tokens are not bitcoin, check better. Or is everything a big baloon of hot air to you? I think you need to get more into the nitty gritty of the details before being able to give meaningful answers. Did you ever go to the bitcoin meetup in dublin we have organised every month since 2013? Do you contribute to crypto projects with code, reviews, research and documentation? Have you read the bitcoin whitepaper?

If you want i can get an expert to explain it to you for a low hourly price, but only if you promise you will listen with open mind, an activity you have demonstrated to perform rather poorly so far on this subject.

This is as much as i can do from a hospital bed in bangkok streight after my 6th surgery, more to follow when i get my strength back.

loads of love

Best regards,

Gus

P.S. thanks to the bags of hot air that i bought in 2013 and after i can now rest relaxed on this bed knowing i won’t be able to work for probably other 3 months and knowing that being the director of my company i the state won’t give me a penny as per the law. See that bitcoin has value? It makes me sleep relaxed whilest if i didn’t have it i’d be worrying sick

Please do not censor this message if i have unwittingly used some bad language, as you know now English is not my morher tongue

 

[Brendan Burgess]

you are confused here, bitcoin is not a ICO, that’s what you call hot air.

Hi Gus

I did not mention Bitcoin in my post at all? Please re-read it.

thanks to the bags of hot air that i bought in 2013

And some others can relax because they bought a lottery ticket and won the jackpot. It does not make economic sense to buy a lottery ticket, although for some it will have worked out. If you have made money in Bitcoin - great. But you should sell it now before it falls to zero.

Brendan

 

[Brendan Burgess]

If you want i can get an expert to explain it to you for a low hourly price,

Thanks, but I don't need to understand engineering to drive my car. Likewise after qualifying as an accountant and investing over a lifetime, I can reasonably well identify a bag of hot air without knowing its chemical composition.

only if you promise you will listen with open mind, an activity you have demonstrated to perform rather poorly so far on this subject.

Of course, you are right.

That is why I have opened a forum to discuss the topic.
That is why I asked fp to write a Key Post explaining why Bitcoin has value.
That is why I repeatedly ask the question for someone, anyone, to quantify the value of Bitcoin - although no one has done so.
That is why I have asked why Bitcoin went from $1,000 to $20,000 over the course of the year. (You can add to that - why is it worth $7,000 today? Which is the correct value?)
That is why I have asked why clever people believe stupid things.
That is why I have asked why Bitcoin is so special - it it was worth $20,000 why were all the other cryptos not worth that or more?

I am genuinely trying to understand and have an open mind. But absolutely nothing I have read shows that there is any monetary value to Bitcoin or any other crypto.

I currently have shorted it. So if it's worth more than its current price of $7,000, I genuinely want to know, so that I can close out my position.

Get well soon!

Brendan

 

[Negotiator]

Oh dear, I saw that dirty word written in one of the posts again. I don't even want to repeat it.....it's the word referring to the temperature of a substance that we breath!

Getting back on topic and answering the question that was asked.....I wouldn't say I prefer one over the other as I do both and wouldn't put them in the same category (no sh1t Sherlock I can hear Brendan saying! ). Equities generally do well over the long term providing decent enough returns whereas Cryptos are obviously highly speculative but can potentially give off far higher returns in a shorter period (as well as possibly losing all your money of course, although depending how and what you invest in in equities the same can happen).

As Mr Earl pointed out, in an IPO alot of money goes to brokers/investment houses etc etc and the small investor is at a disadvantage. In an ICO, I like the way it's a level playing field and that it's made up of smaller investors. I also like the way you can learn a huge amount about any particular crypto by researching and chatting with the community around it. It's an exciting industry that is evolving at breakneck speeds.

Needless to say though that in the absence of regulation the level of fraud/scams/sh1tcoins continue to be an issue and it's acting as a drag on the industry. Effectively anyone can quickly create an ICO and runaway with the money which has happened countless times. That said, I think it's beginning to mature and people are getting smarter on weeding out the bad actors. For example, checking GitHub for the history of updates (this alone can weed out most of the bad players) and looking for duplicate whitepaper and code etc.

So IPO or ICO? Both.....if I may answer like that!

 

[Gus1970]

I am genuinely trying to understand and have an open mind. But absolutely nothing I have read shows that there is any monetary value to Bitcoin or any other crypto.

I am sorry but it's not what I see coming from you. After all you refused my discounted offer saying that you don't need to understand engineering to drive a car, good point but completely unrelated from my offer and the problem is that you don't know that you don't know yet and at this point coaching strategy suggests to abandon the subject tempoearily, as our conversation won't improve unless we overcome this obstacle, we are in an impasse . We are not ready for the conversation yet.

I wish you all the best, when you believe I can help you call me but at these conditions i won't offer again

Best regards,

Gus

 

[Gus1970]

. But you should sell it now before it falls to zero.

I will add your precious input to my portfolio management strategy, thank you

Best regards,

Gus

 

[MrEarl]

Hi Mr Earl

That's a bit of an odd comparison and question.

Hello Mr. Burgess,

I don't see why, both are used by a company to raise funds and both offer opportunities for high risk investment.

In an Initial Public Offering, there is usually an existing business which is generating profits or has a product which is expected to generate profits. As with any shares, there is a potential to rise or fall, but you are buying something with substance.

In an Initial Coin Offering, if I understand them correctly, you are just buying a bag of hot air. You are hoping that the hype will result in a Bigger Fool coming along and paying more on the secondary market. But eventually, the price of the coin will drop to zero.

Brendan

In the case of either an ICO, or an IPO, you could be buying into a business that is profitable, or loss making (but have a new product / service expected to generate future revenues and hopefully future profits).

Let us recall the "Dot Com" era, many of the companies that raised money later failed, but a few became very successful, profitable, household names. Investing in ICO's certainly brings very high risk, just as investing in IPO's did when we were asked to invest in tech companies back in late 90's, but to suggest that all companies raising funds via an ICO are a "bag of hot air", or that someone speculating on the adoption of their coin or token is betting on a "bag of hot air" is unjustified.

The Bankera ICO (which I suggested you might look at previously) is a decent example. There were existing revenue streams within the business before the ICO, but their plans to roll out full banking services offering both FIAT and Crypto services, required substantial funds to be raised. Those (including myself) who invested in the BNK tokens, now receive a weekly payment being a share of net transactional revenue. It remains a very high risk investment, but it hardly qualifies as a "bag of hot air" when you consider how few companies that IPO, start paying out an income stream a week after you invest.

 

[Brendan Burgess]

Those (including myself) who invested in the BNK tokens, now receive a weekly payment being a share of net transactional revenue.

Hi Mr Earl

I had already pointed this out. If there is a revenue stream from a company or a service, then it has a potential value.

I was not aware that Bankera were paying a return on the investment.

Could you do a quick rough summary of the Return on Capital Employed or the Return on Investment.

Brendan

 

[MrEarl]

Hi Mr Earl

I had already pointed this out. If there is a revenue stream from a company or a service, then it has a potential value.

Sorry Mr. Burgess,

But I don't think that came across clearly in your summary of ICO's above, I took it to only refer to companies that go the IPO route.

I was not aware that Bankera were paying a return on the investment.

Could you do a quick rough summary of the Return on Capital Employed or the Return on Investment.

Brendan

I don't have detailed financial accounts.

There is a share of revenue paid to the token holders each week. From memory, I think it's 20% of net revenue.

I only invested a couple of months ago, so it's difficult to give an accurate estimate on what my Y1 return might be. Payments have been increasing weekly, during the brief period since my investment was made. If you were to push me to annualise what I've received to date, it might equal a return of near 2% in Y1. I've read previous estimates on a couple of websites suggesting a Y1 anticipated return of 2.5% - 3.5%.

I note that there have been 31 weekly payments made to date, so there is some consistency in payments being made. However, that gives no guarantees for the future. Revenue is currently only generated from their crypto exchange, and a debit card available to it's customers. The revenue generated to fund week 31 payments was reported at €103k. They claim excess 800,000 customer accounts on their exchange. Other services are supposed to be rolled out from late 2018 and are expected to generate additional income streams, but again there are no guarantees on future revenue streams.

 

[Brendan Burgess]

I only invested a couple of months ago, so it's difficult to give an accurate estimate on what my Y1 return might be.

With respect Mr Earl. I try to estimate the return on an investment before I make that investment.

I am not really interested in your own personal experience. I want to know what analysis you did before you made the investment. What general data did you use? What audited accounts did you use? You must have compared this investment with other investments, so you must have had some financial basis for doing so?

Or did you just discard your years of training and make an investment based on gut feel?

Even so, what accounts have they published since you made your investment?

Brendan

 

[MrEarl]

Hello Mr. Burgess,

I read the white paper, I decided that I liked what they were trying to do, so I invested a relatively modest sum. It was that simple.

I do not believe that accounts have been published since I invested. There are companies in a number of different jurisdictions (including Lithuania and the UK), so it could be difficult to get a look at the full picture, in the absence of full access to group accounts. Obviously, the UK accounts should be accessible via the UK Company Office, but it could take me a long time to find information for a company in Lithuania, not alone translate it when I did.

They publish their weekly revenue and how they have calculated the revenue share for all to see. The most recent report was for week 31, with week 32 due in the coming days. I expect that after week 52 results have been published, it would be appropriate for accounts to be prepared for the full year. I may look for the accounts of the UK company thereafter, but that won't necessarily give me the full picture.

In general, if I were to try and justify an investment in an ICO based on traditional analysis, I don't think I would ever have put money into any of the opportunities that I've looked at to date. However, I approach these opportunities very differently, as I see them as little more than small, very high risk bets.

 

[honeybadger12]

90% of ICO's are flat out scams, you have better odds trading IPO's as they're more predictable.

 

[MrEarl]

90% of ICO's are flat out scams, you have better odds trading IPO's as they're more predictable.

Where did you get that figure of 90% please ?

I don't doubt that some are scams, but would suggest that more are likely to be genuine projects that prove unsuccessful (not to be confused with scams).