Author: Jeff

The initial coin offering (ICO) train is moving full steam ahead. This train has been building steam for awhile starting with Bitcoin. Bitcoin tested out the use of cryptographically distributed ledgers at a global level.  From the bitcoin test, we are now seeing all kinds of different tokens being issued out on crypto ledgers. Along this train ride we are seeing controversies from individuals, issuers, and regulators of what the coins actually are.  Are they pre-sales, hybrids, or equities?

One of the first coins to arrive prior to bitcoin was the “ShutterStock” type of credit or coin. The ShutterStock credit is very easy to understand. It’s an exchange of currency for a credit which can be used to purchase a product. We see this when purchasing a picture on ShutterStock.com. If you make a purchase of $29 dollars to ShutterStock, they in turn give you 2 image credits which can be used to buy a picture. This can be seen as a pre-product buy. A credit is bought in order to purchase a product in the future which is common in crowdfunding or todays ICO’s with their whitepaper.

The second type of coin is the “Beanie Baby”.  Beanie Babies are a hybrid of pre-product release coins with the ability to have some intrinsic value unrelated to ownership in the company.  If done correctly, the Beanie Babies price is driven by the actual product and actual value that is created outside of the product value.  Typical ways of creating this intrinsic value is through premium services that the ecosystem provides to it’s members.  An example of this is seen with decentralizing the network and members setup a server to do some type of mining or validation to get paid. Keep in mind, the intrinsic value can be all hype which can be a form of value.  An example can be seen with the Beanie Babies on eBay as below picture shows.

The third and final coin is the Equity coin or “Crypto Equity”.  The equity coin is actual ownership in a business which passes the Howey Test.  An example of this type of issue is seen with Blockchain Capital. The token is crowdfunded and filed as a Reg D Rule 506c with the SEC which is an unregistered security. This is a very new concept because it allows transparency and an auditable recording of all ownership with the ability to transmit easily to another party.  A more general term is the “Crypto Asset” or “Crypto Security” which can represent other security assets such as debt.  Typically, these types of coins are regulated by the SEC and FINRA.

With all the ICO hype, the coins will be one of the above three categories.  The coins all start at an initial price and go from there.  A ShutterStock coin starts at $1 and ends at $1.  A Beanie Baby coin starts at $1, and depending on supply or demand can increase or decrease in value.   The final coin, Crypto Equity is related to ownership in the company which can go up or down in price just like a publicly traded stock.  We are in a new financial paradigm.

Information contained herein is for informational purposes only and should not be construed as an offer, solicitation, or recommendation to buy or sell securities, or personalized investment, tax or legal advice. The information has been obtained from sources believed to be reliable; however no guarantee is made or implied with respect to its accuracy, timeliness, or completeness. Authors may own the stocks they discuss. The information and content are subject to change without notice. TreveriCapital LLC is a California registered investment advisor.  Securities offered through Rainmaker Securities, LLC – a registered broker dealer, Member FINRA/SIPC. 11390 W. Olympic Blvd, Suite 380, Los Angeles, CA 90064. Investment opportunities listed with Rainmaker Securities, LLC involve a high degree of risk, and are only suitable for “accredited investors” as defined by the U.S. Securities and Exchange Commission. All investors are encouraged to seek legal and other professional counsel prior to making any investments.

Investors be on the alert. Blue skies is really blue skies. The term blue skies came from commissioner Dolley in 1911 of Kansas stating “speculative schemes which have no more basis than so many feet of ‘blue sky‘ ” referencing the amount of company stock issued to the amount of blue sky above you. We are currently seeing the risks, schemes, and exploits with initial coin offerings (ICO) violating various securities laws.

The hype continues daily of the newest companies on Ethereum using smart contracts to issue an ICO on the “blockchain” for their business model.  This is very similar to the Dot-Com Boom of the late nineties.  Blockchain gets internet nerds all warm and fuzzy.

Any business with a dot com at the end of its company name that went public in the late nineties  rocketed in price.  The same holds true today but instead of filing correctly, the startup company skips the  necessary procedures needed to lawfully sell stock to the public.  Instead, they issue an ICO for equity without any proper regulatory filings. Who needs a broker dealer right? Licensed brokers? Nah, waste of time when everyone is thirsty. Just pretend, right?

These companies that raise capital as an ICO usually claim they are incorporated in another country or have some other fake exemption like cash balance receivables as equity or whatever they want to make themselves believe.  What ever the company does, if they solicit US investors it has be filed properly. If it looks like a security, smells like a security, then it is a security. ICO’s  are not exempt from these regulations in the US no matter how they want to slice it up as equity.  Those are some of the basic questions the regulators will ask these ICO’S.

Some of the typical security violation are the 1933 Act, 1934 Act, Reg ATS, or Blue Sky’s laws.  Here’s a typical ICO violation and the full PDF details.

Keep in mind, not all ICO’s are scams. But a good warning, if it seems too good to be true then you may want to question it. Do we all hear pump and dump or ponzi schemes?  FINRA Blockchain Report gives some good insight.  As the old saying goes, “Caveat Emptor” or “Buyer Beware”.

Information contained herein is for informational purposes only and should not be construed as an offer, solicitation, or recommendation to buy or sell securities, or personalized investment, tax or legal advice. The information has been obtained from sources believed to be reliable; however no guarantee is made or implied with respect to its accuracy, timeliness, or completeness. Authors may own the stocks they discuss. The information and content are subject to change without notice. TreveriCapital LLC is a California registered investment advisor.

spotify unicorn slayer executive liquidity IPO

This is no Aprils Fools…

This is another case of unicorn slaying.  Lets see how this slay unfolds. Recently Spotify issued a $1B convertible debt from TPG, Dragoneer, and Goldman Sachs clients. We will call them the VC mob (VCM).

Terms:

  1. VCM can convert the debt to equity at a 20% discount of the IPO price.  (print money baby!!)
  2. If no IPO within 1 year, the carnage, oops, I mean the discount increases 2.5% and the interest on the debt (5%) will increases 1% maxed out to 10% every six months there after.
  3. VCM can sell their shares 90 days after IPO.  Spotify employees are locked up for 180 days zombiefied.

What this means is Spotify will IPO ASAP.  The race to zero first reported by The Wall Street Journal.  Treveri Capital specializes in risk management for executive liquidity of pre-IPO companies.

Information contained herein is for informational purposes only and should not be construed as an offer, solicitation, or recommendation to buy or sell securities, or personalized investment, tax or legal advice. The information has been obtained from sources believed to be reliable; however no guarantee is made or implied with respect to its accuracy, timeliness, or completeness. Authors may own the stocks they discuss. The information and content are subject to change without notice. TreveriCapital LLC is a California registered investment advisor.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

If the public markets are any sign of the future, unicorn valuations will be difficult to understand.  Public companies are an indicator of comparable private companies.  Public companies are also the most comparable to any private business when seeking valuations because they are constantly being priced during the day with various buyers and sellers.  Although private companies are protected from the volatility of the daily public  markets, private companies have very uncertain valuation numbers especially when they are juiced up.

Even though public companies are public, their valuations are uncertain.  An example is seen here with Linkedin ($LNKD) and Tableau Software ($DATA).  Over night their valuations were annihilated.  LinkedIn has $9.6 billion (-43.63%) and Tableau Software has $2.1 billion (-49.44%) valuation disappear in 24 hours.

LNKD Unicorn

DATA unicorn valuation

As we can see, Wall Street does not hold back.  Eventually these private companies need liquidity for insiders, investors, or expansion.  They either raise another round of fantasy juice, get bought out, or do an initial public offering (IPO).  During this process, valuation is re-analyzed.  If the public markets are any indicator of the future, be mindful of any private company hiccups.

Is this the start of “The Disappearing Unicorn Act?

 

 

Information contained herein is for informational purposes only and should not be construed as an offer, solicitation, or recommendation to buy or sell securities, or personalized investment, tax or legal advice. The information has been obtained from sources believed to be reliable; however no guarantee is made or implied with respect to its accuracy, timeliness, or completeness. Authors may own the stocks they discuss. The information and content are subject to change without notice. TreveriCapital LLC is a California registered investment advisor.

David Bowie Bonds Treveri Capital Intellectual Property Debt Finance

David Bowie, known for his eccentric style of music, fashion, and theatrical performances has passed away January 10, 2016.  He was very influential to several generations from the 70’s to the 80’s and more.  What most people forget is his contribution to the financial industry.  He was a financial innovator with his famous “Bowie Bonds”.

With the help of investment banker David Pullman, David Bowie set the path for securitization of intellectual property (IP) with a $55 million bond in 1997.  Securing this esoteric IP can be seen today in the music, film, and digital publishing or formally known as asset backed securities (ABS).  Also, this led to the financing of Motown, James, Brown, Marvin Gaye, Iron Maiden, Rod Stewart, and more.  Today this billion dollar market is flourishing with liquidity on various electronic communication networks (ECN’s).

Thank You David Bowie for being an innovator!!

David Bowie Ziggy Stardust Finance Innovation Bonds Debt IP

 

Unicorn Hunting Permit TreveriCapital Slayer Hunter Alpha Kill

Most people have heard of the term called “Pegasus” or “Unicorn” in the startup world to describe a mythical startup valuation of $10B+ or $1B+.  There is another mythical creature called the “Centaur” with valuations of $100M+ and the “Pony” with valuations of $10M+.  Although the Pegasus and Unicorn are getting all the recognition, Centaur’s and Pony’s may have all the glory for 2016.

There is a new startup landscape on the horizon.  To be a true Unicorn, the companies will be raising capital from investors that will want justification for these current or future valuations.  This means typical Wall St. models will be used for earnings, sales, or growth metrics to show investors the justification of the valuation.  Particular analysis of the most recent 4 quarters and next quarter will be looked at closely.  Instead of throwing money at marketing for user acquisition, costs will be analyzed under a microscope.  Unicorn slaying will be common for these Unicorns that are unable to sustain rapid growth of sales, earnings, or metrics.  Any blips in these quarters can grind the Unicorn into a Unicorn burger.

The risk of high valuation for a Unicorn gets a little ugly when there is limited liquidity.  The SEC is also looking into startup valuation procedures.  As Mark Cuban noted “The only thing worse than a market with collapsing valuations is a market with no valuations and no liquidity.”  Let’s face it, private equity is a different animal than public companies listed on an exchange.  Changing valuations is a risk that all participants will have to deal with.  Because Unicorns are more mature start-up companies, liquidity for owners of the company drops when valuations stay the same or drop.  This is very important because the next round of financing needs a higher valuation in order to make current and potential new investors smile.  These valuations are derived from the prospect of earnings, sales, or growth metrics.

Because of the new strict criteria, investors will be looking at Unicorns or alternatives that have a solid business model, outstanding growth potential, and experienced leadership.  Some of these alternative businesses may be Centaurs and Pony’s for investors to pursue and catch.

2016 will be quite interesting because we will see a rise of institutional investors going into early stage companies in search of Pony’s or Centaurs in hopes of finding a Unicorn.  Some of these Unicorns will transform into the most sought after creatures, the Pegasus.

Disclaimer: Information contained herein is for informational purposes only and should not be construed as an offer, solicitation, or recommendation to buy or sell securities, or personalized investment, tax or legal advice. The information has been obtained from sources believed to be reliable; however no guarantee is made or implied with respect to its accuracy, timeliness, or completeness. Authors may own the stocks they discuss. The information and content are subject to change without notice. TreveriCapital LLC is a California registered investment advisor.

Martin Shkreli Retrophin Ponzi Price Gouging TreveriCapital Security Fraud

Wannabe pharmaceutical hedge fund manager Martin Shkreli gets charged with several violations from the SEC.  Martin gets charged with violations of the 1933, 1934, 1940, and Exchange Act.  Hedge fund manager made several mistakes and tried to hide them.

Some of the violations include:

  • Misappropriation of moneys for food, clothing, medical, office rent, and cash
  • Misleading investors about the size and performance of the fund
  • Falsifying bank and brokerage account assets
  • Lying to an executing broker about his ability to settle a sizable short position
  • Misappropriating $900K for short sale settlement
  • Fraudulently issued stock from Retrophin (RTRX) to pay disgruntled investors and non-disclosure

Read more about bad trades gone semi ponzi here.

Disclaimer: Information contained herein is for informational purposes only and should not be construed as an offer, solicitation, or recommendation to buy or sell securities, or personalized investment, tax or legal advice. The information has been obtained from sources believed to be reliable; however no guarantee is made or implied with respect to its accuracy, timeliness, or completeness. Authors may own the stocks they discuss. The information and content are subject to change without notice. TreveriCapital LLC is a California registered investment advisor.

metropolis towers dtla eb-5 los angeles trevericapital SEC lawyer charges

Planned Metropolis Towers DTLA

EB-5 is quite popular here in the Los Angeles area.  Most of the construction downtown Los Angeles is from Chinese EB-5 money.  It definitely attracts multiple participants because of the money involved.  Although there is big money to be made in EB-5, it is highly regulated and difficult to successfully do.

EB-5 is a way for an immigrant (popular with wealthy Chinese) to get a greencard by bringing in money and following strict guidelines. If all guidelines are met, they get a greencard in a few years. This is where it gets tricky.  The general EB-5 guidelines are they need to bring $500K-$1M into the US and generate a minimum of 10 new jobs for 2 years for a new commercial enterprise. What does this mean?   Multiple professionals are needed to align these moons.

To do these deals, a lawyer is needed and somebody with good deal flow.  Why is the deal flow so important?  It’s important because of sustaining 10 jobs for 2 years. That means the project being done as a deal must not fail or eliminate jobs.  If the project fails, then no greencard.  Also, if done incorrectly, you can be in violation of securities laws.

Recently, the SEC charged EB-5 lawyers for being unlicensed securities brokers and in violation of the 1933, 1934, and Exchange Act. Not only did the lawyers charge their normal fees to the client, but they got commissions for the deals without disclosing this to their client.

These EB-5 lawyers that violated the securities laws are another example of why it’s so important to have transparency, full disclosure, and regulators watching after the general public.

 

Disclaimer: Information contained herein is for informational purposes only and should not be construed as an offer, solicitation, or recommendation to buy or sell securities, or personalized investment, tax or legal advice. The information has been obtained from sources believed to be reliable; however no guarantee is made or implied with respect to its accuracy, timeliness, or completeness. Authors may own the stocks they discuss. The information and content are subject to change without notice. TreveriCapital LLC is a California registered investment advisor.

The CFTC ordered a monetary penalty and permanently bans Garen Ovsepyan, Sharpe Signa LLC and Haeres Capital LLC from the commodities industry.  The ban was for misrepresentation of $145 million vs $15 million assets under management (AUM).  Also, the forex trading advisor was not registered as a CTA and claimed a false exemption from AUM.  Link to CFTC Fraud.






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