Topic: SANDSTORM: - A Collective Investment Vehicle for BTC. - - page 7. (Read 35774 times)

Yeah it's unlikely it had much to do with the inflation to date.  But consider if he announced he was closing down and looking for a replacement manager.  At that point if you held a significant number it would be worth selling to yourself at progressively higher prices just to inflate the buy-back if no replacement manager was found.  With enough shares (or enough people cooperating) you could block any vote to approve a new manager anyway and force a buy-back.

It's one of the reasons why nothing I run (or will run) has a buy-back clause related to market price - those allow manipulation in both directions (down by issuer IF issuer is allowed to sell new shares and up by investors).

Yep, he definitely set it up poorly. I hadn't even considered that it could cause the price to inflate, but I'm skeptical that is what's going on anyway. Pumping the price long-term is unsustainable, unless Mutch works some real magic with increasing the actual value of the fund.

It's a different risk here than for most funds.

Most funds promise in the event they cant continue to sell off assets and share it out to investors.

Sandstorm promises :

"If on the unlikely chance that Sandstorm can't continue:
Shareholders will be fully informed and a suitable replacement for management will be sought after. If this attempt is unsuccessful, shares will be purchased back at 105% of the 7 day average. All remaining assets will be liquidated and distributed to shareholders through dividends."

So he promises to by buy back based on market price - which is horrible for a fund to do.  Having made that promise I think korbman's perfectly valid point is that he should be demonstrating that he has the assets to do so (NOT just the assets the fund holds) otherwise the fund is backed by a promised buyback value which can't be delivered.

Buy-backs based on market price are widely used - and are bad in pretty much every case.  They either allow the issuer to talk (or flood) the price down first OR they expose the issuer to having to pay an excessive amount.

With the current trading price for Sandstorm I have no idea whether the issuer could afford to buy back per his contract - and it would be unreasonable for him to do so anyway.  But that's what his contract promises - and some part of the price rise MAY be due to that, with people realising that per the contract if they can inflate the price then even if it shuts down they get to keep whatever rise they've managed to achieve.

Buy-backs should be based on what's received for assets - other than for bonds where a fixed price should be determined in advance (or a formula provided allowing calculation of the price).

His contract APPEARS to say that shares will be bought back at 105% AND investors will receive proceeds from selling assets.

The rules need to be different in bitcoin. Trust is earned and justified, not gambled for.

Plus, he already does share his holdings info, he simply doesn't prove it yet. So trade secrets are not the issue anyway.

Has Mr. Mutch earned his license? Or is he driving blindfolded with kids in the car?

He could certainly share his asset listings, but to a certain extent this would somewhat undermine the value of the fund since anyone could watch his trades and benefit without being part of the fund. I'm not saying that the transparency wouldn't be worth it - merely that it somewhat reduces the value of underlying trading decisions, which seem to be a significant portion of the profits.

I hate to bring this up since I don't want to compare Mr Mutch with one of the world's greatest investors, but Warren Buffett didn't tip his hands to investors - he expected them to trust him to do what was in their best interest, without being involved. Of course, he had yearly audits to prove his holdings.

Korbman, you raise some good points, and some that are a little off the mark.

-- The Sandstorm Description does not "promise" or "guarantee" profits, last I checked. He states the yield as goals. I agree that his methods and strategy are left to mystery though...
-- When a fund issues new shares, it does not necessarily dilute the value because the bitcoins gained all belong to the fund. While they may not dilute things, it's possible for him to push down the price if they are overvalued however. Maybe the answer is that he should have included exactly how he will price future releases, and what will trigger him to do so, etc.
-- Regarding your worst-case scenario where Mr. Mutch can't "buy back" the shares in the event of dissolution, one one hand this is a risk for most assets. However, in this case, dissolution should involve the liquidation of assets on behalf of the shareholders, not a buyback.
-- Yes, Mr. Mutch could easily share his BitFunder wallet address so we can verify his holdings via the Public Asset list. He should also make public his BTCT.co portfolio since the allow this. Only Havelock does not have this feature, ironically...

Out of curiosity, what's so missing from PHM, and how is that related to whether it will get an inflated price? Seems to me they are simply a mining fund looking to grow by issuing shares in proportion. The BFL appears to be an old order, not a "plan".

Havelock does get identity info for issuers, and conducts a phone interview. I assume they did what they could in that regard with Sandstorm & PHM.

Don't confuse the risks of ALL bitcoin investments and pin it on one. PHM could run with the money, and so could every other issuer, even the trusted ones. Furthermore, any business can also make mistakes and render their company worthless over time. These are risks across the board though.

"Pump & dumps" are not a symptom of something Havelock or issuers are doing wrong. They are a symptom of investor ignorance, and probably a symptom that bitcoin is overvalued itself, since so many people are so willing to be irresponsible with their coins...

Well said, Korbman.

Swinging back around, #3 is not the best option but should be a requirement for any company trying to dive into securities of this nature.  But #1 is important - the immediate option for one/handful of parties to immediately take all stake in an IPO is a death knell.  It serves as a race to the gate in which the only incentive is early buy and quick dump during excitement. I have serious doubt that anybody who purchased the initial shares genuinely gave a damn about the investment short of "First dibs, now you buy from be sucka!". 

And to back my point, email from Havelock today in regards to PHM.  300k shares, 100k purchase option per person.  Pump and dump with (sorry) a weak business plan attached (plan to buy from BFL is a business plan?).  I'm really hoping this is a joke or a mistake because this will be Sandstorm v2. 

I'm actually considering pulling by funds from Havelock completely because this is two strikes in the first week I've been involved with them.  This is just plain irresponsible, it almost looks like PHM is literally a pump and dump of an IPO because the plan is *so* incomplete.  I would expect some quality control for potential investments.  As stated previously, BTC can be a shady world and I would hope/expect the goal isn't to sucker new people in with this stuff only to leave them burned and pissed at the whole process.  'Cause that's the gut feeling I'm having right now.

Alright. 11 pages later (read twice) and I think I’m ready to craft a response

First, let me preface this by saying I respect the decisions made by Havelock administrators.
In my 9 months of being hosted on their exchange, never once did I ever have any qualms with how operations were run, and Lightbox was always incredibly responsive to questions not only posed by managers, but investors and customers in general.

That said, I’m quite shocked with how this whole situation has developed; between the vagueness of the ‘investment fund’ (more on that momentarily) and the seemingly rushed IPO, something doesn't quite sit right with me given how methodical and organized previous listings were.

To the topic of Sandstorm – here’s where the fun begins. Yes, this will be an extensive post and I apologize. As a forewarning, my responses may sound rude and/or condescending, but I assure you I don’t mean them that way. I imagine it as if you and I are sitting at a table and I’m asking these questions with more of an upbeat attitude.
Generally speaking, the willingness of the OP to thoroughly answer any and all questions can be indicative of the effort they’re willing to put into their business. Let’s see how this goes…


How do you define these strategies? Can you prove your past performance?


[1] – So far as I’ve seen, this has been just ‘words on paper’. Echoing my question above, can you prove your performance on previous investments?  Essentially the question becomes – “how much wealth” over “how much time”?

[2] – Either your inexperience is showing or this was just poorly worded (I’m going with the latter for now). Increasing the amount of capital is not directly correlated to an increase in wealth creation. With improper diversification it’s actually a great way to increase risk…and mismanagement can lead to great losses as well.

[3] – I suppose this goes back to the “sophisticated investment strategies”. A bit of clarity and transparency could make all the difference here.


No contract has been created so far as I’ve seen..more of a prospectus than anything else.


From what I’ve gathered through the rest of the thread, you’re promising a weekly 1% dividend (minimum), with the expectation of achieving growth.
Growth over time is normal, but if you truly are a legitimate fund, then promising a set percent of dividends per week is not possible. There are far too many variables (both known and unknown) to promise anything in Bitcoin, and I’ve learned this firsthand.

I don’t have a problem with dividends. I do have a problem with guaranteeing them, as that’s usually indicative of a scheme.


How do you plan on releasing more shares to the public down the line without diluting investors’ holdings?


I’m actually quite curious about this. Why not mine? Mining can provide a stream of income for your fund, which may be helpful when times get tough (and they will).


Hypothetical scenario:
Sandstorm is sought after in Australia for securities trading and is pending a lawsuit. Managers of Sandstorm are unable to find a suitable foreign replacement to take over and decide to follow through on “Plan B” (repurchasing).
Bitcoin has risen in value to $250 each. Investor [A] owns 1000 shares of Sandstorm, and the 7 day average is BTC0.1.

How do you plan on repurchasing 1050 shares (valued at 105 Bitcoins) now that they’re worth $26,250?


Whether in Bitcoin or “real world” trading, there is no such thing as a low risk / high reward investment. Marketing yourself this way leaves me a bit skeptical.


Naturally, we appreciate the marginal transparency, but after the Bakewell scam names and addresses don’t quite mean as much anymore.


I think you posted the wrong Google Docs link. The ‘financials’ you posted are just shares sold. Where’s the income statement? Maybe a balance sheet? Current assets held by the fund? Dates when shares were bought / sold, their respective prices, profits / losses?

Phew! Now that we’ve got that out of the way, on to the rest of the posts:


Do you have any proof of your holdings and when they were purchased?


TradeFortress has a point, even though he didn’t vocalize it.

I thought the idea of this fund was to make “smart” “low risk” investments? To me, that means only investing in securities which you are confident in. Gambling with potential scams with the hope that “it’ll go up to .0007” is not investing, it’s speculating.

Imagine in those 3 days that the price dropped to .0003. What then? Buy and hold and hope for the best?

As Furuknap aptly noted:

And in terms of being transparent with your actions…


…this is a bit unacceptable. There are numerous ways to show your background operations, which would instantly clear up quite a bit of skepticism.

As I write this, I’m beginning to question why you’re more than willing to reveal your identity, yet you won’t want to reveal the details of your investments. And before you say it, no, that “Asset List” with a bit of math does not qualify as ‘detail’.

Done! (for now of course)
I thank you for taking the time to read this and no hard feelings. We’ve had far too many scams around here and it’s only proper for members to vet new entries. Most the established members here share the same sentiment that I do, so I’m hoping this will provide you with a channel to clear the air so to speak.

On that note, I've been tossing the idea of spec'ing a Bitcoin Asset Listing Standard (that's right, BALS). I haven't decided whether to do this wholly in the open or get a big chunk of work done first and then get help editing it, but Deprived, if you are up for helping with the project, let me know.

The idea would be for it to serve as reference guide and standard for exchange operators and issuers to strive for and meet, and serve as a reference and primer for investors to have in wrapping around their heads around investing, specifically within the nuances of the bitcoin environment.

BALS could include things like IPO methods, prospectus specs, types of assets, due diligence processes, etc, etc.

I know some may snicker, but MPEx has done a lot of work already in this area, and I intend to build of some of MP's sentiments, as well consider adding things like his AN0 accounting spec, etc.

It would be a potentially time-consuming undertaking, and may end up have no affect on the quality of bitcoin investing at all, considering so many people seem so determined to lose their money, but I personally see it as a potential learning experience and useful research as well.

Some real good points from Deprived and we'll start discussing them internally to see which ones we'll move forward with.  I'll post updates to any changes to IPO process in the Havelock thread (no timeline yet though) as I don't want to hijack this one.

Don't think the problem is so severe for Sandstorm as majority of investors bought prior to sale on Havelock.  Price SHOULD drift back down as some of the ones already holding it sell to lock in profits (and maybe to buy back in once its fallen to lower levels).

Raising more funds at the higher price is one of worst things to do for a whole bunch of reasons which I can't go into detail on as got to do other things right now.  But in short either:

It doesn't sell out at the high price - at which point price collapses anyway and issuer is locked in to not selling cheaper or they screw anyone who bought directly from them at the high price.

It does sell out - in which case it'll get flipped to a new even more absurd range and the issuer has added legitimacy to a price well above underlying value plus set a precedent for the markup they're expected to issue more at.

Issuer should just disclose what they're doing with their personal shares (Are they holding them or selling into the inflated price), make sure everyone knows whats actually backing each share and let the market fix itself.  Selling more just because something sold out makes no sense - if issuer needed to sell more then why didn't they do so (or announce that it would happen) in the first place?

I share your sentiments exactly, Deprived. That's an excellent description of what happened exactly, as well as how to prevent issues in the future.

As far as moving forward, I see the issue that Sandstorm now has capital of 100BTC but a valuation of over 1000BTC. Sandstorm now either needs to raise more capital or disappoint investors who will have over-hyped expectations on their returns. It's either that or the share price will drift back down to reasonable levels, which will make for some disgruntled investors.

If I'd had an account/funds on Havelock I'd have tried to buy a chunk to flip.  This always happens with any IPO which has a small market cap - a few people buy it out then try to resell it at a huge markup.  Some of them actively try to manipulate the market as well.

To see it really in practice, LTC-GLobal is the place to look - would guesstimate half the securities there are, or at some point have been, manipulated up by one or two people holding a lot of the shares, bidding it up, buying off themselves to make the inflated price look like an active trading range etc.

As TAT said, limiting how much one account can buy is NOT the solution.  Solutions, such that they are include:

1.  Giving significant notice of IPOs (a week plus)
2.  Issuer ensuring that the real underlying value is well publicised - unfortunately many issuers prefer their shares to trade at inflated prices (as they can then sell personal holdings and/or issue new ones at the inflated prices).
3.  Educating investors.

#1 is important - not so much because it'll change who gets the shares but because:

a)  It ensures investors are aware of the IPO price for a period of time.  That reduces the problem of ones who never realised it was happening and aren't properly aware of just how inflated a post-pump price is.
b)  It maximises sales revenue for the Issuer.
c)  It reduces whining afterwards - as well as legitimate complaints of not being aware because of short notice.

#2 is tricky as, on the face of it, it acts against the issuer's own interests - most issuers seem to believe that their share price rising is automatically a good thing.  I disagree with that belief but it appears widely held.  It's also very hard to get the message through anyway - I repeatedly said noone should buy my LTC-ATF.B2 at much of a markup (as it's a fixed rate bond only paying about 17% per year) yet within an hour of selling the first batch someone had bought them at over 80% markup to face despite it being callable at 105% of face.

#3 is the best solution (to the extent that there is one).  The problem right now is that investors over-react to anything they perceive as good or bad news.  An IPO is considered good news - as is the arrival of an ASIC - and both are seen as a valid reason for a price to absolutely sky-rocket.  When both should have already been largely priced in already - the former by the issuer and the latter by the market.  We're in the silly situation where as soon as mining companies receive ASICs their price inflates making them even worse that over-priced PMBs.  And where any time anything with a small market cap IPOs it's pumped by speculators/flippers/traders (or actual market manipulators) and the actual investors happily play along.

The solution isn't trying to stop the speculators/flippers etc - it's trying to inform investors so they don't play along other than where it's actually warranted.

Meh. Sadly, a p/e of around 20 is typical valuation for a ponzi scheme.

(I don't mean offense by that, just a funny thing I read somewhere.)

Weekly Report.

It has been an unpredictable week, so I have been trading quite conservatively. It has been more difficult over the last week or two to judge where the AM share price is going. I’ve largely been simply holding these assets with minimal trading. I'm looking purchase more AM shares over the weekend as next week could potentially be a good one.

I’m still kicking myself for selling the previously owned bASIC shares far too early. I’ve been following creativex’s thread closely and decided that it could be wise to reinvest an amount for a period of time.

Today half of Sandstorms Cognitive shares were sold at a decent profit.

Also, rentalstarter on bitfunder looks like an interesting medium/long term investment. However, it looks risky. A small amount was invested into that venture.

The IPO has been finally completed with the last 19700 units being brought within seconds on the Havelock trading platform. I’m happy that the goal of 100BTC has been raised. Now it’s time to move forward and focus on trading.

Happy trading



Profits
.32BTC Trading bASIC Shares
.43BTC Trading Asicminer PT shares
2.7BTC selling 10 Cognitive shares

0.353 BTC ASICminer dividends
.004 BTC Cognitive Dividends
.006 BTC bASIC Dividends


Total =3.813BTC (2BTC to dividends+1.813BTC to carryover fund)

Dividends
2/100000 = .00002 per share

Last weeks assets


Assets
10 ASICminer direct shares (2.5)
6 ASICminer-PT shares (2.48)
4 ASICminer-PT shares(4.19)

10 Cognitive Shares (.28)
100 RentalStarter shares (.0149)
40 bASIC shares (.27)
38.4BTC

I added the PS after the quote so re-posting
Blame my habit of spelling and grammar consistency
 
Regarding Fortresses point that might be a good idea back in the day when S.Dice was released it was bought in IPO's at different prices so a incremental release might work in the future can't recall exactly how it was handled but that was similar to the idea mentioned.
Although the updates button on the fund page next to the overview is there for a reason ^^

A full flip is a surprise but I agree that it is easily possible if executed well with that size of equity.

I can see though how correlated to the issuer trust a big size would seem less logical as has been said through the pages though it is a bit of a puzzle how the market reacts sometimes it must have wanted fresh meat since the fund variety is still growing.

I'll leave James and the team to figure the best answer to this question and same opinion as you TAT I sort of knew their would be a TAT IPO since I've been pestering you to get to the 5k goalline ^^.

But with regards to the Sandstorm IPO it did catch me a little off guard as the main havelock page did not release an ANN and I wasn't on the ball with the e-mail.

If I recall correctly thought the AM original was not on the IPO listing Announcement but was only sent into my e-mail inbox but don't quote me on that back then.
On a sidenote it did kill my AMC bookmark maybe I should request that it redirects the url to Am100 na I complain too much already  .
You all do a great job



To jmutch
Thanks for taking the time to reply direct communication is very important and the fact we get to communicate directly with people is one of those good old civilities ^^

+1

I don't think there should be limits on how much of an IPO can be purchased.

Also, I think the IPO could have been advertised better. I talk to James all the time, and I am on Havelock's website all the time, but I had no idea the IPO was at 1am EST.

I just happened to not be subscribed to this thread.

I probably wasn't going to buy anyway, but if I had known it was so soon, I would've read the prospectus and known right away the 100btc IPO would sell out and could be flipped.

It isn't the initial private sale that is concerning, it's how it was handled via Havelock.  Like I said, I believe in the system, but this was poorly executed. 

Hopefully this is addressed in the future.  The funds I put into Havelock for purchasing this IPO are still sitting in that account and will be invested, but having the "launch" of such an IPO be a frenzied pump-n-dump immediately puts a stigma on the fund.  Nothing against your strategy, I'm rooting for 'ya and will definitely buy-in when prices are closer to the IPO, but this whole process seems to have been an exercise in frustration for a lot of folks when it should/could have gone a lot smoother. 

And this isn't meant spitefully, but we can't be BFL'd by "we couldn't predict this".  Before it went live people were already saying the per-buyer limit was absurd, anyone prior to the IPO could have adjusted this to make it a more reasonable and drama-free launch.  That didn't happen, now we're on 11 pages.  

I think you are looking at this the wrong way. The actual IPO was 100,000 shares. People were free to buy as many shares as they wanted prior to the transfer to Havelock. 80300 units that were purchased directly were transferred to havelock prior to the release of the remainder of the IPO.