Topic: ASICMINER Speculation Thread - page 117. (Read 808847 times)

Uh, no, the market cap includes no such things. It is the product of the share price and the number of shares outstanding.

The sum of ten years forward of profit is generally an excellent rule of thumb for a fair market cap.

In most industries 10 years forward is hard to estimate, even for mature companies. Mining has unusual constraints and it is much, much easier to come up with a 10 year projection.

That might be something more like Enterprise Value

Friedcat is going to beat 10%. He's the under-promise, over-deliver type.

Also note for your calculations that Friedcat said (I'm pretty sure) he was aiming for 10%, when he was at 20%, the idea of maintaining that kinda stuck in forum members brains. You know how it goes.

you somehow managed to forget that market cap of company includes also know-how and physical assets (routers, PSUs, machines included in ASIC manufacturing process)

It's allowed. Better to reclaim the black-scholes implied value by selling.

If you exercise early you lose the optionality-value.
Better for you to hedge by buying some stock (which you can sell at expiry to the option writer).
Look up delta hedging.

Or sell them, but not sure btct allows that.

Educated guess. Yes - that means "I don't know". I am fairly confident I am close enough to reach a reasonable conclusion, though, which is what is important. I have estimated conservatively; AM will have to perform exceptionally well to be worth more than my price target.

I've estimated that it costs FC $1.50/GH currently. That will drop for Gen 2. Based on estimates for the competition (which are much higher, in general), I think it is possible he will continue to dominate for the next year - although a 75% profit margin is pretty extreme. I'm sorta playing the waiting game with the year-forward margin. It's not going to go up much (obviously it's impossible to go higher than 100% anyway), but it could go down a lot if the competition shows unexpected strength.

30% is a very impressive profit margin, but not out of the question for year 3 of an immature industry.

20% beyond year 3 is very generous. Most mature companies do not make that kind of margin, and ASIC mining is a low-barrier industry, so that's all faith in Friedcat right there.

How did you estimate profit margins Vycid?

Any one knows the news on Bitfunder's G.ASICMINER-PT? No posts from Ukyo in a couple of days now. Alot of shares waiting to be withdrawn by me and others with no update . The scary part is we don't know if Friedcat will credit us the shares if Ukyo pulled a Nefarious on us! I really don't think he would but can't deny I am pretty much scared of the situation!

1) Sorry if ~1M was too inaccurate. 1.36M it is.

2) There is nothing to suggest that fees will be a substantial part of the equation. If fees do become a substantial part of the equation within the next couple of years, it will probably be because Bitcoin has become mainstream, and AM will not yet be ready to compete with companies like Intel or IBM if that happens.

3) "Also - selling business uses coins that are already mined" - I'm not sure what this means. If you think people are going to intentionally buy hardware at a loss, you're kidding yourself. Using a hardware sales based business model REDUCES potential revenue.

If we assume the simple model that AM attains and maintains 20% of the hashrate for another year, at an average of 75% margin (excellent and unlikely, in my opinion), drops to 30% profit margin (still maintaining 20% of the hashrate) for the year following, and to 20% margin for the next 8 years (again, at 20%), this is the breakdown of total BTC profit (remember that the block reward halves in approximately 3 years, then again approximately 4 years after that, and again 3 years after that):

Year 1: 0.2 * 0.75 * 1.36M = 0.204M
Year 2: 0.2 * 0.3 * 1.36M = 0.0816M
Year 3: 0.2 * 0.2 * 1.36M = 0.0544M
Year 4-7: 4 * 0.2 * 0.2 * 1.36M/2 = 0.1088M
Year 8-10: 3 * 0.2 * 0.2 * 1.36M/4 = 0.0408M

Net profit, ten years forward (reasonable estimate of fair market cap for most companies): 0.4896M BTC = 489.6k BTC

Current market cap: ~2.25 * 400000 = ~900000 BTC

Market cap at my price target of 1.5 BTC: 1.5 * 400000 = 600000 BTC

So you can see I'm actually modestly optimistic.

This model excludes transaction fees, as I believe they will either be negligible or accompanied by stiffer competition. You can adjust it with your own projections if you desire.

Also worth noting when considering ASICMINER's "market cap", is that many of those shares will likely never change hands.

That's the thing that a lot of investors in ASICMiner can't grasp or don't think is important. Just because something is well-run by a capable businessman, doesn't make it impossible for it to be overvalued. Not too many Vycid-critics have made a stab in public at what they think fair value is. It would be fascinating if they did, even more so if they explained how they reached their answer. It might even raise the level of discourse.

Valuation might not matter in the short-term, but in the long-term it always does.

there are 1,36M minable coins per year, with assumption of zero rise in difficulty (difficulty rises because there are more than 2016 blocks in 2 weeks) and with assumption of zero fees. Also - selling business uses coins that are already mined. Stop spreading bullshit, please.

I agree, absolutely, 100%. ASICMiner is not just the best Bitcoin mining business I have yet seen, it is the best Bitcoin business. Period. Friedcat is a gifted businessman and an honorable person.

It's also still overvalued and I've made a ludicrous return on my short position. We're talking about a company that was nearly worthless at the beginning of the year and was recently valued at something like $250 million (@ 5BTC/share). It's hard to imagine that it WOULDN'T overshoot fair value with growth like that.

And even at the current market cap of ~900,000 BTC, it is clearly overvalued just by the simple fact that there are only ~1M BTC that can be mined per year, and competition IS coming regardless of Friedcat's business acumen. No industry can maintain margins above 20-30%, certainly not one with barriers to entry in the <$2M range.

I maintain a price target of 1.5 BTC. In my mind, that is actually a fairly generous target from a fundamental standpoint. I believe in Friedcat, I just believe in math and free-market competition even more.

Even if there were delays with the next gen chips, and there's nothing solid to say there are, the current gen is still profitable.
Irrespective of shareprice and the risks they face, I think you might agree ASICMINER is a pretty sweet operation. Perhaps not invincible (I think something may have been lost in translation there,) but still in an enviable position for the future.

They're well-funded, but that doesn't mean they can't have reasons not to spend money. Like if their chip isn't working in simulation, for example.

It's just weird, is all. There may be a benign explanation, but I'd have expected FC to have spent more of his war chest by this point.

All we know is ASICMINER is well funded. If you think friedcat is dragging his heels with the next gen of chips, I'd say you're wrong.

Didn't we JUST have this conversation? He needs to spend that money now if he wants to make his Gen 2 deadlines.

Perhaps he HAS spent some of it. I'll look through the recent history for that address.

Edit:

This transaction is significant, I think - http://blockchain.info/tx/51de795ea7c7f56f24389dbc44a46a9804638fb9eef895a3fc547f14a36f4407

The total sent is ~$400,000. Trouble is, I can't make any sense of where it went. It looks almost like it went through a coin mixing service. There are tons of addresses through which most of the money went, with the remainder ending up here: http://blockchain.info/address/19jCc77eCEK1VNcHnjLVeAzLJvmedRPCJP

If anyone better at blockchain analysis can figure this out, I'd be grateful.