The usual drama.
November came in about as bizarrely as the holiday that precedes its open for Second Life financial markets.
The Midas Group Bank debacle.
Yet another bank has supposedly "bankrupt" that being Midas Group Bank, which formerly traded on the WSE. There's a whole lot of drama around this story as well. Supposedly the CEO had the bulk of his assets in Hope Capitol Bonds. I don't know how long it will last, but here's what all the fuss is about. It may not be long before the last url is wiped from the google records, but for now it should be viewable and should display the following:
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Dividend and Bond Payment History
This page provides Dividend/Bond Payment History. Bond Interest payments are known as the Bond Yield and are paid either monthly or quarterly to bondholders. Dividends are a share of a company's earnings, paid either monthly, quarterly or annually, decided by the board of directors to shareholders. The dividend is most often quoted in terms of the dollar amount each share receives (i.e. dividends per share or DPS). It can also be quoted in terms of a percent of the current market price, referred to as dividend yield.
Dividends Posted by Midas Group High Yield Bonds (MGB)
| Posting Date: | September 15, 2007 |
| Period From: | September 15, 2007 |
| Period To: | September 15, 2007 |
| Outstanding Shares/Bonds Issued at Posting: | 138,857 |
| Total Payment: | L$1388.57 |
| Payment Per Security: | L$0.01 |
It's the last trace of information on MGB that Hope Capitol has not erased from the web.
It's not uncommon for the World Stock Exchange to completely erase all traces of any company that's gone utterly bankrupt. It makes sense from a management standpoint to remove such thing as they definitely detract from the attractiveness of one's market, but the greater concern is how is the World Stock Exchange going to to handle this situation? Given the claims, MGB had assets in Hope Capitol, owner of the World Stock Exchange, itself. If this is true, how will asset distribution for the failed company be handled? I personally have no objection to MGB being declared bankrupt. I know a little bit about Midas Commons from an earlier encounter in the SL Markets.
Few know this, but when I was COO for AVIX, I screened some of our ipos. Of which, to date, only one has failed that I screened and that was CYB, they completely forged their credentials. I had the unsavory job of filtering out the good from the bad, the wheat from the chaff among the many business ideas that will be presented to a trading exchange for sale as equity. I evaluated business plans, characters, and attitudes. When Midas Commons approached me, he had presented the IPO plan for his bank in a casino parlor. Atop that, he had utilized high pressure tactics in order to attempt have me force the IPO to the floor faster. What he didn't know, is that as COO, I didn't have issuing authority, only the CEO did. I merely gave my thoughts on whether or not a business was in fact legitimate and had an operating basis. He had claimed the CEO said I should rush his review process, which does not make sense. This smelled like fire to me, and when the time came, I talked to Investor Allen, who was CEO at the time.. and the IPO was rejected. I didn't alert most others in the markets, because sometimes companies on hard times can pull themselves from the brink. Given the new light on the identity and past of Investor Allen, I find this most ironic he turned down Midas. But to to summarize, I knew he was desperate and that his businesses which were already listed on the Word Stock Exchange, must already be failing. So if Lukeconnell Vandeverre declared the man bankrupt, something he's never done before to any other stock, there had to be good reason. If Midas had truly hedged his entire company on Hope Capital Bonds, it was one of the most foolish decisions in the Second Life markets to date. You never invest everything in any one security as a bank or a portfolio manager, it's just very wrong and excessively risky.
However, if this was the reason for the destruction of MGB and it did in fact have assets then Lukeconnell Vandeverre needs to be finding a way to get that value back to shareholders. I'm afraid just diluting ownership of both deposit holders and bond holders to WTF would not qualify as financial justice and would only serve in further dilution and damage done to Ginko Bond Holders and other victims of unethical business operators on the WSE. The price is already through the floor, this would just serve to drive it further through the floor.
The ultimate solution: Compensation MGB shareholders at the average market value of MGB for the past 72 hours that it was trading on the stock exchange prior to its freeze and closure, as; being a former very small quantity bond holder myself.. (maybe 2-500 bonds total at the most) which I used for day trading, the price was very very low as it was compared to issuance. Surely there must be that value left in assets somewhere for MGB if it had HCB assets. If not, at least publish an accounting of what MGB had, what was accessible, what was dissolved. Supposedly the WSE stands on ethical principles. I call on its administration to demonstrate those principles as best it can by providing full disclosure of the incident in some fashion that is easily accessible to the public.
While the SLEC (Second Life Exchange Commission) has called for a boycott by investors and a self-delisting of WSE companies, I only see that causing more damage to the victims and rather pointless. The trading public has returned to the WSE time and time again, and I'm sure it will again. I would just like to see Hope Capitol act with a greater responsibility towards its in world clients. After all, responsibility is also a virtue, it just isn't mentioned directly in the the virtue list. I also encourage greater research into the operating capabilities of any given business plan, verify whether or not these companies can operate and that their ideas are feasible before allowing them to issue capitol. It will take time, it will take effort, and verifying character is difficult, but in the end it will be worth it. The more events like this continue, the more damage is done to the SL Markets and WSE specifically. Eventually there will not be an investing public and all SL corporate business will be rendered worthless, versus micro-cap.
The BNT tightrope.
Due to some capitolization deals gone awry, BNT which trades on the Ancapistan Capitol Exchange is in the unsavory position of having some internal investors wanting out at a price well lower than NAV, capping their stock price around .30. Unfortunately, with market activity on ACE being described so far as lackluster at best, I don't see an immediate remedy and the situation may last for some time. That said, there is a lot of potential for volatility on the issue and it should be watched closely although Intlibber Brautigan has assured me personally that the situation is well under control and that as part of an active trading deal, the internal shareholder in question is limited to only dilute at a minimum of NAV - 20%. FYI, that's about .48/share.
BNT also has a heavy influence in the SLEC, which is likely why the SLEC is taking such a heavy hand with the WSE and encouraging its destruction at every opportunity. Lukeconnell Vandeverre was offered a membership on the SLEC at one time when the SLEC was more fair and balanced with all exchanges having their say, but recently the influence of Ancapistan has made the commission a little more hostile than normal, especially without a balancing voice from the WSE on board.
The Other Exchanges (ISE, DSE, CAPEX, VSTEX).
The other exchanges have been relatively quiet and uneventful since the beginning of November with a little bit of an upwards creep in share prices across the board on most exchanges and a slight increase in trading activity, perhaps indicating a gradual confidence rise is settling in these markets. VSTEX is seeing more activity with new offers and ipos. DSE has added an IPO and is trading slowly as typical for a very lightly advertised and inconvenient to access exchange. CAPEX and ISE have seen mild fluctuations with no significant news to report. And remember, while my reports are as comprehensive as possible, do some footwork and trade at your own risk. It's a wild second life.
On a side note, my thanks to the SL Financial Wiki, for starting a record of the past others may seek to clean from the internet.
PS. Please be kind enough to visit a sponsor :-)
For more on the Midas Group story, you may want to look at another perspective amidst the firestorm: Delicious Ideas: FED UP!!
3 comments:
Maelstrom!
This is an excellent written, cogent piece. I learned more here than in scanning around aimlessly for a couple of days... well done.
I've returned the link to my blog - and I'll come back to look for more!
DD
Dear My Fellow SL Residents,
There has been a claim by a group called "SLEC" or Second Life Exchange Commission that CEO's delist or for shareholders to sell their shares.
The SLEC is not what it once was, it is now a front for IntLibber Brautigan to help him promote his new exchange and to allow him to try and create negative press about the WSE which he has always done since we left his land due to him trying to force WSE on a decision that wasn't in the interests of the market but his land business.
The announcement was directly posted to SLEC members by IntLibber Brautigan and only goes to confirm the above.
They allegations made by IntLibber concerning the Midas Bank situation are completely inaccurate.
Hope Capital announced that it would be cancelling the bond interest payment and dividend. These payments have been deferred and are to be paid at a future date.
Approximately 3 weeks later Midas Commons contacted me and asked if we were paying the interest. He had not read the announcement concerning his major investment and only read it after I asked him to at least 3 times.
Once he read the announcement he said that he would be bankrupt without as he would have no lindens for his bank depositors along with no lindens at all for commitments to his companies listed on the WSE.
I explained that we would not be changing our own financial decisions no matter what his financial position. He then repeated that he is bankrupt and that we must pay him the bond interest payment along with making many threats and demands.
Midas was clearly bankrupt and in distress and after showing signs of financial distress in the month leading up to this situation.
The WSE made a decision to lock his WSE account in order to prevent him from dumping his assets on the market, crashing prices and leaving SL which is a situation that has occurred to often in the past with other SL banks.
We informed Midas of these actions and requested that he supply the avatar names and balances of his bank depositors so that we could also allow them to benefit from the actions taken by WSE to ensure that users will get the best possible return on their deposits. To date Midas has only offered to provide such a list if Hope Capital honour his deposits of between 6 to 10m lindens in OurBank. Hope Capital isn't going to take on responsibility for an additional L$6-10m debt that was created by Midas Commons. There is also the potential for him to create false accounts under alternate avatars that would allow him to allocate himself huge balances and therefore steal lindens from the system.
Since Midas is bankrupt, a word he repeated multiple times to me, the WSE then delisted his listed companies and transferred all shareholders, shares and bonds of Midas companies to the WSE Traders Fund. We also removed any shares owned by Midas Commons in his own companies so that there Net Asset Value would remain close to what it was prior to the delisting of Midas companies.
This situation occurred approximately 3 weeks after Hope Capital had made its announcement concerning the bond interest payment and dividend and the decision has nothing to do with Midas Commons or an alleged takeover attempt.
The WSE Traders Fund shareholders own former Midas assets not HCL or the WSE.
There are over 25,000 WSE users of this less that 500 would even know what the SLEC was or is and even less would know anything about the Midas situation or the announcement by SLEC as their reach, membership and exposure to the market is limited. The demands by the SLEC should be taken as a grain of salt and not taken seriously.
The WSE does not acknowledge or endorse the SLEC for a number of reasons mostly as it is yet to follow up words and intentions with actions such as offering educational information to SL traders etc.
The WSE now has come along way since the 7th March 2007 to become the leading Internet based Stock Exchange system focused on virtual companies in Second Life.
Since being established it constantly overcomes any challenges it faces while improving and growing to provide users with and the world with a fully interactive trading experience.
The WSE has achieved over 25,646 accounts, raised IPO's over L$129,551,917.70, WIC$1,809.15, Secondary offers over L$27108766.30, WIC$2991.23 and had exchange turnover exceed L$509,690,788.19
The WSE is progressing well. We have been aggressively cleaning up the market, making sure CEO's keep the market updated and delisting any companies that fail to adhere to the WSE Constitution, Listing Rules and Terms.
We have also been extremely busy developing the very latest version of the WSE Platform called WSE 4.0 which is progressing well and we expect the new website design, layout, functionality and services should be completed by the 25th of December 2007.
We are cleaning up the market and developing the WSE trading platform ready for our worldwide launch of the World Stock Exchange to the mass market as the worlds leading internet based stock exchange platform to be used for educational and entertainment purposes.
We expect majority of future WSE traders will be general Internet users with a browser using the World Internet Currency as their chosen currency for trading on the WSE.
We expect that trading volume will exceed L$10m lindens per 24 hours with excess of 50,000 new WSE traders participating in the market.
We ask for your patience, continued support, continued regular updates to the market such as monthly announcements and financial reports while we complete this final major phase of the WSE's development and growth.
Before making any decision or taking any actions I always make sure that I'm fully aware of the possible consequences.
Every decision I make or action I take are made in the best interests of the majority of stakeholders at all times. There are times when we as leaders must make decisions that can lead to some negative consequences in the short term in order for us to make a greater positive impacts in the longer term. It is for this reason that WSE is still operational when many other virtual businesses and bank are not and it is for this reason that the WSE is on the verge of major growth.
Kind Regards,
LukeConnell Vandeverre,
Chairman & CEO
World Stock Exchange (WSE)
www.wselive.com
Luke, I applaud the more pro-active approaches you have been taking to getting the fraud rate under control, but I'm very concerned about all fraud being resigned to WTF that still has a very questionable value in and of itself. To me it's akin to trading paper for paper. Usually in a liquidation what occurs is a summary of the assets of the company are published and the liquidation values of those assets (that are accessible) are also published and shareholders are compensated up to whatever is capable of being liquidated and is not held in obligation to bond holders. Why don't you take this approach? The transparency would be far more encouraging to market participants.
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