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First off, I have a sizeable amount of Modum, roughly 50% of my portfolio. I think it's a great project and I'm sure the company will do well but what exactly will drive modum's token price? The tokens themselves aren't required to use the service/product so am I correct in saying the only driving force behind the token price is the demand for tokens due to the dividends paid out? If this is the case, I'd like to hear opinions on whether people think these dividends will attract enough interest to really drive the price of mod up to $5/10/20? Any opinions would be greatly appreciated!
A reply from one worried user:
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First off, I’m going to be attacked for commenting.
You are correct in associating the price with the expectation of dividends. I wouldn’t really expect it to move until a reasonable dividend is paid, maybe a year away. Also consider the difficulty the token might face getting listed, due to the fact that it looks and acts like a security. Consider the legal uncertainty in the space. I won’t get into the other issues I have, but those are the ones that may affect the price in the near term. Also consider that freshly unlocked tokens could potentially get dumped by the company.
You are correct in associating the price with the expectation of dividends. I wouldn’t really expect it to move until a reasonable dividend is paid, maybe a year away. Also consider the difficulty the token might face getting listed, due to the fact that it looks and acts like a security. Consider the legal uncertainty in the space. I won’t get into the other issues I have, but those are the ones that may affect the price in the near term. Also consider that freshly unlocked tokens could potentially get dumped by the company.
And the really articulated and competent answer:
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I won't attack you personally of course, but I think your arguments are flawed Travis.
The tokens do derive their value from profit sharing. In fact, they are the only way that profits can be distributed as the shareholders (founding members) have passed their profit-sharing rights completely over to the token holders. Not only have they done this, but they have locked away their allocation of tokens until the milestones have been reached - which creates an incentive for them to create value. Yes, they may sell some of their tokens when they reach the milestones. A lot of people inside companies sell their shares for a variety of reasons - purchase a house, a car etc. To suggest the company would 'dump' their tokens is FUD, a pretty emotive word and quite ridiculous considering the insiders who founded this company are in a position to receive perpetual profit-sharing from these tokens. Think about it - the only reason the insiders would dump is if they knew the company wasn't achieving its objectives. Now, the only way they can receive their tokens is if they DO reach their objectives. So the argument doesn't stand to reason.
There's been a lot of conjecture as to whether the MOD token is a security. It's been answered elsewhere in this forum and it's clear that it's not. It's listed on Binance and they will not list securities, see this post: https://www.reddit.com/r/modum_io/comments/7eu6s4/modum_is_not_a_security_period/
Modum.io are have stated they are confident their token is not a security, and have taken great pains to ensure they do not engage in activities that classify them as such. This is why they will not make any comment on future profits - because giving profit guidance is one of the qualities of a security.
It is also plain wrong to think the the perceived value of the company, which is reflected in the token price, will not move until they pay a dividend. There are hundreds of listed companies worth billions of dollars all around the world that do not pay dividends. Why are they valued at these prices if they never pay dividends?
Think of the stock/token as a future. You are buying a part of the rights to share in the profits of the company in the future. This token can be traded as the future gets closer and the expectation of said dividend is realised. Let's say that theoretically Modum.io said 'In 2019 we will pay a dividend of $1 per token' - the token isn't going to stay at the current price for a year then the day before the dividend, suddenly shoot up. That's ridiculous.
Upon this announcement, it would immediately go to a price reflective of the market value of this dividend. Token holders would ask themselves 'What would I pay now, to receive a guaranteed $1 in years time?' Would you pay $2? $10? Well, to guide you on this, the mean Price / Earnings ratio of the S&P 500 is currently about 15.68 Using this standard, the MOD price would be somewhere around $15.68 per token (discounted a little for the present dollar value). So maybe it would immediately go to $10-$14. But as we know hype could drive it far higher until it settles down. Look at every crypto moon chart!
However if dividends were expected to increase greatly after that, a much higher PE ratio would be used - for example, Google's PE ratio is 26. Facebook is 75! So even though Facebook might pay out just $1, it's priced at $75 (in terms of ratio) because the market expects its dividends to be much higher in the future. If the same expectation of earnings potential were applied to Modum.io, it would have a price of $75.
So - the primary factor that will drive the price is 'What profits will they make, and what's the likelyhood these profits will increase'? As shown above, this is REGARDLESS of whether they pay out a dividend now, next year, or in ten years. The token isn't traded and priced on a one-off basis to receive a dividend, just like shares on the stockmarket aren't bought the day before a dividend is announced.
Modum is right now finalising integration of their sensors into the leading parcel/logistics company in Switzerland. I don't know who this is, perhaps Swiss Post? I don't know, that's a guess. But p19 of their whitepaper says it best:
"Currently, the modum system is being integrated into the system of the leading last-mile logistics service provider in Switzerland. modum.io is planning to finalize this integration in Q4/2017, using the first series of proprietary temperature loggers. Clients from the wholesaler and mail-order pharmacy segment are lined up. Upon successful completion, official market entry in Switzerland will begin in Q1/2018. Once integration has been established within our first client site, the logistics service provider can approach the SME pharma segment to offer the additional service. Furthermore, modum.io is in contact with significant customers from within the pharma distribution vertical in the UK, France, Germany, Turkey, and Vietnam."
Remember they enter this market with a 60% cost-saving edge on the current system, in a cut-throat business where margins are everything. Uptake will certainly be swift. In the EU alone there's 200 million shipments and Modum's research shows clients will pay $10 a shipment. That's 2 Billion dollars of potential revenue a year. Even a very small percentage of this, say 5% - would mean $100 million of revenue. If they paid JUST 10% of this as dividends, that's $10 million, and at a PE of 15 that values the company at 5 x its current price. It's far more likely to have a much higher PE though - 30 to 50, putting it at 10x - 16x, or maybe far higher.
If the market believes this is possible - then the price will certainly go up to something approaching those values, for the very same reason that say, Waltonchain's price did a 6 x when the market realised it's earnings potential, even though they are a long time away from turning a profit. Modum is actually much closer to making a profit, in fact, have said they will break even in 2018 -being careful to avoid the term 'forecast a profi't ;-)
We are about to see these objectives realised and the market is catching on to the fact that Modum will likely achieve these goals, and more. What will it take for the market to believe? Probably some updates by the CEO (monthly, commencing 30th November - in 6 days), announcement of finalization of the integration into the leading logistics provider (expected by end of 2017), announcement of signed contracts with client/s (expected within the coming weeks)
So - it will move, and move big, when the market sees these things, which will be in the coming weeks / couple of months at worst, not in a year. :-)
The tokens do derive their value from profit sharing. In fact, they are the only way that profits can be distributed as the shareholders (founding members) have passed their profit-sharing rights completely over to the token holders. Not only have they done this, but they have locked away their allocation of tokens until the milestones have been reached - which creates an incentive for them to create value. Yes, they may sell some of their tokens when they reach the milestones. A lot of people inside companies sell their shares for a variety of reasons - purchase a house, a car etc. To suggest the company would 'dump' their tokens is FUD, a pretty emotive word and quite ridiculous considering the insiders who founded this company are in a position to receive perpetual profit-sharing from these tokens. Think about it - the only reason the insiders would dump is if they knew the company wasn't achieving its objectives. Now, the only way they can receive their tokens is if they DO reach their objectives. So the argument doesn't stand to reason.
There's been a lot of conjecture as to whether the MOD token is a security. It's been answered elsewhere in this forum and it's clear that it's not. It's listed on Binance and they will not list securities, see this post: https://www.reddit.com/r/modum_io/comments/7eu6s4/modum_is_not_a_security_period/
Modum.io are have stated they are confident their token is not a security, and have taken great pains to ensure they do not engage in activities that classify them as such. This is why they will not make any comment on future profits - because giving profit guidance is one of the qualities of a security.
It is also plain wrong to think the the perceived value of the company, which is reflected in the token price, will not move until they pay a dividend. There are hundreds of listed companies worth billions of dollars all around the world that do not pay dividends. Why are they valued at these prices if they never pay dividends?
Think of the stock/token as a future. You are buying a part of the rights to share in the profits of the company in the future. This token can be traded as the future gets closer and the expectation of said dividend is realised. Let's say that theoretically Modum.io said 'In 2019 we will pay a dividend of $1 per token' - the token isn't going to stay at the current price for a year then the day before the dividend, suddenly shoot up. That's ridiculous.
Upon this announcement, it would immediately go to a price reflective of the market value of this dividend. Token holders would ask themselves 'What would I pay now, to receive a guaranteed $1 in years time?' Would you pay $2? $10? Well, to guide you on this, the mean Price / Earnings ratio of the S&P 500 is currently about 15.68 Using this standard, the MOD price would be somewhere around $15.68 per token (discounted a little for the present dollar value). So maybe it would immediately go to $10-$14. But as we know hype could drive it far higher until it settles down. Look at every crypto moon chart!
However if dividends were expected to increase greatly after that, a much higher PE ratio would be used - for example, Google's PE ratio is 26. Facebook is 75! So even though Facebook might pay out just $1, it's priced at $75 (in terms of ratio) because the market expects its dividends to be much higher in the future. If the same expectation of earnings potential were applied to Modum.io, it would have a price of $75.
So - the primary factor that will drive the price is 'What profits will they make, and what's the likelyhood these profits will increase'? As shown above, this is REGARDLESS of whether they pay out a dividend now, next year, or in ten years. The token isn't traded and priced on a one-off basis to receive a dividend, just like shares on the stockmarket aren't bought the day before a dividend is announced.
Modum is right now finalising integration of their sensors into the leading parcel/logistics company in Switzerland. I don't know who this is, perhaps Swiss Post? I don't know, that's a guess. But p19 of their whitepaper says it best:
"Currently, the modum system is being integrated into the system of the leading last-mile logistics service provider in Switzerland. modum.io is planning to finalize this integration in Q4/2017, using the first series of proprietary temperature loggers. Clients from the wholesaler and mail-order pharmacy segment are lined up. Upon successful completion, official market entry in Switzerland will begin in Q1/2018. Once integration has been established within our first client site, the logistics service provider can approach the SME pharma segment to offer the additional service. Furthermore, modum.io is in contact with significant customers from within the pharma distribution vertical in the UK, France, Germany, Turkey, and Vietnam."
Remember they enter this market with a 60% cost-saving edge on the current system, in a cut-throat business where margins are everything. Uptake will certainly be swift. In the EU alone there's 200 million shipments and Modum's research shows clients will pay $10 a shipment. That's 2 Billion dollars of potential revenue a year. Even a very small percentage of this, say 5% - would mean $100 million of revenue. If they paid JUST 10% of this as dividends, that's $10 million, and at a PE of 15 that values the company at 5 x its current price. It's far more likely to have a much higher PE though - 30 to 50, putting it at 10x - 16x, or maybe far higher.
If the market believes this is possible - then the price will certainly go up to something approaching those values, for the very same reason that say, Waltonchain's price did a 6 x when the market realised it's earnings potential, even though they are a long time away from turning a profit. Modum is actually much closer to making a profit, in fact, have said they will break even in 2018 -being careful to avoid the term 'forecast a profi't ;-)
We are about to see these objectives realised and the market is catching on to the fact that Modum will likely achieve these goals, and more. What will it take for the market to believe? Probably some updates by the CEO (monthly, commencing 30th November - in 6 days), announcement of finalization of the integration into the leading logistics provider (expected by end of 2017), announcement of signed contracts with client/s (expected within the coming weeks)
So - it will move, and move big, when the market sees these things, which will be in the coming weeks / couple of months at worst, not in a year. :-)