Doing in gradually, with 10 or 25% of profits going to the reserve fund seems much more reasonable to me, rather than doing it all at once. Is this where the problem is, that the contract says 100% of profits go to dividends? Couldn't you just list it as an expense to pay off the loan which gets taken out before profits are calculated?
Sure, it could be done gradually such that a % of earnings each month go to building up the pool. I'd rather just get it over with, do one single month without dividends and then problem solved.
"I'd rather ..." yeah, that is what would be good for you, but as the manager of SatoshiDice you have the responsibility to do what would be good for the shareholders. Seems there is a conflict of interest here.
Of course. But the math is as follows - 3-4k BTC needs to be retained in order to create an asset betting pool for SD. If not, then I have a personal loan to SD indefinitely.
The only conflict of interest here is that I was being extremely generous about letting SD use that money for free, and now I need to go back to being normal, and establish a betting pool for SD with its own funds.
Strictly speaking, in the narrowest interest of an s.dice shareholder, Erik (me) should continue to loan the 6100 btc to the site forever, for free. But sorry, I'm not going to do that. Anyone have a good suggestion if my plan is so terrible?
The shares were sold as representing a share of profits.
If the pool was meant to be provided by shareholders then a portion of the funds raised from IPO should have gone for that purpose rather all of it going to you.
You received ALL of the capital raised from sale of shares, in part, because YOU were providing the working capital needed. Accepting that risk - and providing that commitment - was all part and parcel of the original sale.
The key part of the contract of relevance is NOT the bit saying 100% of profits will be distributed, but rather the part defining profit. Specifically:
"Net Profits here mean profits after explicit SatoshiDice development and Marketing costs (such costs, if any, will be described monthly in the Profit and Loss Statements). SatoshiDice does not pay salaries to any party, so no salary will be taken out of Net Profits. "
Only development and marketting fees can be treated as costs - NOT interest on loans or provision of capital. And, for that matter, not any salaries or other costs related to running the business unless they're explictly either development and marketing. In short there should be ZERO deductions in respect of anything which could be considered an operational cost.
How to do that? well of the 100% of IPO revenue you received (counting yyour partner as you for simplicity) and the 87% of profits you receive maybe you should have assigned some portion to cover YOUR end of the deal. Which includes covering the costs of actual operation - one of which is the cost/rsik of providing sufficient capital.
Alternatively you could have done the contract differently - so that some portion of IPO funds was used as a float. You could, in effect, change to that now - by GIVING to the company that portion of IPO funds that should have been retained if you'd IPOed with investors supposed to provide working capital.
What isn't acceptable is trying to charge investors twice - once so you can have it and then a second time so the funds go where they should have gone in the first place.
Another alternative would be to sell some of your own shares to raise cash to replace that currently tied up in the float. That would be contractually allowed and is likely the best solution - even if it does produce a lot of whining about depressed share prices.
