Can we conclude that a failure of this motion results in the PPT closing down? What I take from the contract is that this basically renders PPT.DIV shares worthless, seems like an easy decision?
Actually no, that doesn't happen so easily. The way the business is set up doesn't allow it to be shut down like that, and it's not an "easy" decision. However, we also need to protect the value of the business and return acceptable returns to the PPT.DIV holders. Obviously making a perpetual loss renders the DIV shares worthless, but we're aiming not to incur losses with the change in payable interest rates. This was well signalled even as early as the very first PPT.A issue - if the rates change, so do the payoffs. Because we have voting shares with PPT.DIV, the motion is required to be put.
Thanks, I generally support the motion but am a little concerned that increasing the price could see the market look elsewhere.
I've just answered a pm and then saw the post and thought it might be worth repeating the bulk of the contents here, particularly because of the comment about the "market looking elsewhere" and certainly we have been watching the progress, success or otherwise of this venture keenly with each passing bond auction, and the growth in competitors.
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The notion of just shutting up shop (ceasing) is not so straight forward because we have a duty to protect the interests of PPT.DIV holders and that includes those of us that have/are/do hold those shares. Also, the current case is not one where we actually have an option to simply stop trading. Pirate has not defaulted, and BS&T is continuing. The only way we see that would be possible is if all of the outstanding shares were held by someone wishing to cancel them (say, if I held all 9000 DIV shares).
It was anticipated some months ago that the interest rate might change. The choices in that circumstance would be to wind everything up (undesirable as people have invested in PPT.DIV for the profit share, and the underlying premise/operation can continue), or reset the payment based on the new interest rates (which we have determined is the best course of action at this time - pending some other other we had not thought of).
If the motion were to fail, the PPT offer would still take place. For this week it would have around 3.5 weeks of 7% interest and one week of 5% or 6% depending on the size of the BS&T deposit (maybe 7% but less likely). For the following week it would be 2.5 to 1.5 and buy the time we get to August it would all be on the new rates. Leaving the current floor of 1.00 and paying 1.28 on maturity when income is 0.24 (say) would incur a loss and the PPT.DIV dividends would, of course, fall to zero.
The other big change in the PPT.x space has been the large group of copy-cat offers where people can buy large quantities of pass-through bonds. That linked to the very large availability consumed by those offerings took a lot of value out of our business. Having seen todays reaction, that looks set to continue. Also, people do not appear to value the insurance - it has been derided as a gimmick by some, but fundamentally it seems people are all in on the BS&T risk, or invest somewhere else. Back in late April and early May, the market was more concentrated, since then, bidding has been around 1.02, and that is not a profitable level going forward, so we have to do something now. Certainly the auction this week should clearly indicate how buyers of the PPT.x bonds assess and value the changes.
Overall, Burt had a brilliant idea back in April and we (the six of us) collectively put in a lot of work to make something that did work, and put around 4000BTC at risk. We had a lot of requests to make a share of the profits available and the best option was to segment the profits from the underlying capital and operations - and we did that. There was potential for the whole thing to blow up (pirate default) and there still is, but it looks like BS&T is running a while longer yet. However, competition has also come along with people prepared to run pass-throughs for virtually no margin. In hindsight, we would have collectively been better off leaving 4k in BS&T. But for now, PPT.x offerings are set to continue as there isn't an event that would cause or allow a winding up of the company.
