Topic: The Bear Argumemt for ASICMINER - page 2. (Read 3029 times)

this selloff though 

I'm back in, my new cost basis is 3.18btc

You were clear. You said when one AM share is 5 BTC then 17.62%  "were invested" but that is incorrect because that many were not invested to become 5 BTC and it doesn't mean we value it at that much of BTC in circulation because the total BTC of all investment valuations greatly exceeds the total BTC in circulation. That is no different than real life. And as soon as you try and claim all of that value, it slips and adjusts. It's never taken for face value. So is the theory that it would require that many to "support that share price." We discussed this in the main topic already.

https://bitcointalksearch.org/topic/m.2627441
https://bitcointalksearch.org/topic/m.2626782
https://bitcointalksearch.org/topic/m.2627210

Market is illiquid, slippage can cut the price in half easily

Ok, maybe I wasn't clear.  If all of the shares in circulation are assumed to be worth the same, then at 5 BTC per share it would require 17.62% of all the Bitcoins in existence to support that share price.

There aren't multiple classes of shares, there are just shares.  I would agree, just because 1 share trades for 5 BTC doesn't make all 400,000 worth that much.  And that is probably the point, if the market can't support a total valuation of 2mil BTC, then why should 1 share be worth that much?  When you are valuing a company, you can't just exclude some shares because they belong to the founder.

That's not true at all. It's far far less.

Friedcat holds half the shares, those cost him 0 BTC.

Majority of people got in at 0.1 and 2.5, not 5. On the way up the purchases are quite thin because people are hoarding. Meaning it didn't take many bitcoin to move it from 2.5 to 5 while at was walled at 2.5

Something like 3-5% of all bitcoin in circulation.

I am a trader at heart, and I owned ASICM from 2.2~ until today. 

There are a lot of ways you could go about trying to model the price of AM and what it should be worth based on projected future earnings, etc...

Sometimes though I find it helpful to step back and take another perspective, and in this case the one that made me decide to get off the ASICMiner train for the time being.

When the shares hit 5BTC per share, somewhere around 17.62% of all Bitcoins in circulation were invested in this one company.

17.62%

Now, like I said, I'm a trader and my gut told me that whatever other reasons I could come up with to justify holding on, that number kept coming back to haunt me.  Our fund has been applying different metrics to try and value ASICM at a reasonable level, but as a trade it was this one number that made me pull the trigger on us selling out our shares.

FWIW...

The P/E analysis stocks have few merits in bitcoin world.  In bitcoin world, people investing in mining equipments would want them to break even in months, break-even exceeding 6 months is unwise in general.  The fast moving and ever changing nature of bitcoin world makes PE rather irrelevant - a PE of 2 means you earn everything back in 2 years.  How many can accurately forecast today's state of bitcoin 2 years ago?  One is better served looking at the discounted cash flow (incl. possible growth in a short term horizon).

Very good argumentation. P/E ratio can be misleading as a streak of good fortune will lead to exceptional high profits growth, and per definition a low P/E ratio. Bidding up the stock price to fair P/E ratio may look reasonable, however if the exceptional high profit growth stops chances are high the market will not be willing to pay that reasonable P/E ratio since the growth is not there anymore.

Satoshi Dice is a prime example. They experienced exceptional high profits growth tenfolding USD profits in a few months time, from an average of only $30k (november 2012) to an average of $300k/month (april 2013). The stock also tenfolded from $4 million to $40 million and the P/E ratio continued to be around 10. Looked fairly priced, however after that the monthly profits stopped growing and even went down somewhat to an average of around $250k/month today. Market didn't like and started selling it, now it's valued at $20 million and P/E ratio of 5. Investors lost -50% the past few months eventhough profits remained pretty much stable!

So anyone buying today AM can better hope the profit growth continues to rise as fast as otherwise the value of the stock will likely correct seriously.

I think you are mistaken - BTC difficulty scales with hashing power. So if global hashing power is lower, then it is proportionally easier to mine bitcoins. Hence why this point is invalid, revenues will be unchanged. The only way AM can lose network share is if its competitors increase their hashrate at a faster rate, which this point has no impact on, as the fiat vs BTC would affect all of them equally.

no, AM (and all competitors) have expenses priced in fiat.  As BTC:fiat falls, it requires more btc to pay for chips, electricity, employees, etc.  Even if the network %'s stayed exactly the same, profits, and thus dividends, would be lower.

Wouldn't that not be the case, as ASICMINERS competitors will also have the exact same problem, hence the mining ratios will remain as they are?

I sold 2/3rds of my ASICMiner-PT at 5btc and all of my TAT.ASICMiner at .05, didn't even stick around for the dividend.

bought in initially at 1.16 and my cost basis was around 1.38

my estimates were for around this price level, so given new information in the future justifying a higher price or an irrational rally, feel free to laugh at me for selling

but I am content with this trade. given that only a month ago, me calling for ~5btc/share was based on "me not understanding how business and valuation works"

So, I bought some Asicminer direct shares for 3BTC, in less than a week they went to almost 5BTC and I sold them.  A 60% profit in a week would just seem piggish to let ride.  Looking at ASICMINER's meteoric rise, especially in the last month, it really is priced for an optimistic scenario.  However, I see several significant negative catalysts which can cause a sharp fall - panic selling in an illiquid market:

1. The tumbling Fiat/BTC ratio impedes ASICMINER's ability to buy new hardware to maintain its total % of the total network hashrate.  In the last 6 weeks we have gone from $130s to $70s. At some point, the relationship between the Fiat/BTC ration and ASICMINE Share price will rubber band back in place if the Fiat/BTC price does not significantly recover.

2. The technological "first mover advantage" of ASICMINER has very front-loaded benefits.  No doubt, early ASICMINER investors between both dividends and the exponential share price rise have been very much enriched.  However, now other ASIC suppliers are finally starting to ship significant numbers of ASIC units, many with significant performance advantages to ASICMINER's proprietary hardware.  ASICMINER is a technology company and you are basically betting they will continue to innovate and stay technologically ahead of the competition if they are to maintain their network hashrate percentage.  KNCMiner, Terrahash, Avalon and even some of the BFL units are superior.  And new more efficient ASIC chips are coming all the time with plenty of eager buyers as the bitcoin awareness raises outside the crypto-libertarian geek world.

3. Everyone wants to compare this to P/E of a Nasdaq listed technology company where a P/E of 15-25 for a fast growing company is reasonable.  However, their is absolutely no regulatory oversight and the risks inherent in investing with ASICMINER are based totally on the trust one places in Bitfoundation and its leadership.  They have shown themselves thus far to be trustworthy (though for the paranoid, that is how the long con works), but the lack or oversight and accountability means this will always trade at a significant discount to a listed company.

I would not short this company outright since it definitely has momentum on its side and friedcat has continuously met and exceeded all expectations.  Still, this stock is due for a pullback and it will be vicious.  Buying some puts to play the volatility may be a good risk/benefit play.  My bet, we will see 3.5BTC/share before we see 6.5BTC/share.