Lets analyze and come to a general consensus about what a fair allocation of BTS (the new merged entity) to former holders of BTSX, PTS, and AGS (the merging entities) looks like.
For a summary of this merger, see:https://bitsharestalk.org/index.php?topic=10214.0I think it is important to look at this event as you would the merging together of companies.
That is, the value of BTSX, PTS, and AGS are being combined together into a new company, called Bitshares, or BTS.
The new company will initially have roughly the market value of the three companies former values put together, and it will also have the potential of all three companies. That is, the new 'Bitshares' company will contain the features of BTSX, and will ALSO benefit from the future development that would have gone into VOTE, etc. It will ALSO be allocated 20% of any future independant DACs that are created.
(Because it acquires the 10%+10% stake in future independent DACs that was previously 'owned' by PTS and AGS).
How does this work? The first thing that must be agreed upon is the price that the acquiring company (BTSX, as it is the largest by far), is paying for the acquired companies, AGS and PTS. We must figure out what the fair price is, to make all stakeholders whole.
In order to look at what a fair value is, let us look at the types of stakeholders current are:1) Pre-Feb 28 Purchasers of PTS or AGS.
These stakeholders bought PTS or AGS before Feb 28. They received their BTSX, and they now hold some BTSX and some AGS. If they didnt buy or sell any BTSX, or PTS since then, then they retain the same final value of BTS no matter what, because they are evenly invested between BTSX and AGS/PTS.2) Post Feb 28 Purchasers of PTS or AGS.
These stakeholders bought PTS or AGS after the BTSX snapshot (at a lower price than those before, since they were no longer getting BTSX out of the deal).
The greater the allocation of new shares in BTS that is given to AGS/PTS, the more they benefit. If the allocation of shares in BTS to them is low, they lose out. If it is high, they win.3) Post Feb 28 purchasers of BTSX.
These stakeholders bought BTSX once it begun trading.
The greater the allocation of new shares in BTS that is given to BTSX, the more they benefit. If the allocation of shares in BTS to them is low, they lose out. If it is high, they win.
As we can see from this, pre Feb-28 buyers achieve a fair result no matter what. (Unless they sold either their BTSX, or their PTS in the meantime, in which case they become like one of the other groups). It is critical that we find a fair result between post Feb-28 buyers of AGS/PTS, and buyers of BTSX.Option A: Merge based on market cap at the time of the announcement.
At the time of the announcement, BTSX was worth roughly $50M, and PTS worth roughly $5M, in terms of recent prices. AGS is essentially the same value as PTS in terms of getting a stake, and therefore this would give it a value of $5M as well.
Therefore, under this plan, we would create a new entity BTS with a $60M market cap (pre-panic sale value), with 2.4 billion shares (as an example). 2 billion shares would be given to current BTSX holders, 1 for 1, representing the $50M value of BTSX.
200 million shares would be given to current PTS holders, representing the $5M value of PTS.
200 million shares would be given to current AGS holders, representing the $5M value of AGS.
Then, the new 2.4 billion share BTS entity would vote on whether to perform a 'capital infusion' in order to fund marketing efforts, creating and selling additional shares for this purpose.
It should be clear that anything that gives LESS shares than this to the PTS and AGS holders would be clearly unfair to them, because their market cap compared to BTSX said that they should be worth at least that much.Option B: Merge based on the traditional social consensus of 10% to PTS, 10% to AGS.
Under this option, a new BTS entity would be created with 2.5 billion shares (as an example).2 billion shares, or 80% of these shares would be given to BTSX holders.
250 million shares, or 10% of these shares would be given to PTS holders.
250 million shares, or 10% of these shares would be given to AGS holders.
This option achieves the goal of maintaining the social consensus of 10%/10%.
This option gives AGS/PTS a bit of bonus value relative to the market caps at the time of the announcement.
It should be clear that anything that gives MORE shares than this to the PTS and AGS holders would be clearly unfair to BTSX holders, because it would pay a very large premium to PTS/AGS relative to the stake the BTSX holders are putting in.
It is normal during a merger, for the acquiring entity to pay some amount of premium over the current market value to the acquired stakeholders, in order to get them to agree to the deal.
In our case, if we go with option B, and give 10% of BTS each to PTS and AGS holders, we are giving them a 25% premium over what the market cap 'said' they were worth. But in doing so we are maintaining the 10%/10% social consensus.
I think that this (option B above) is a reasonably fair solution to all parties. While BTSX holders get a slightly smaller piece of the final pie than their market caps would dictate, it is normal to have to pay a small premium in order to acquire another company. Given that the primary driver of the proposed merger was the fear that VOTE DAC (the part that PTS and AGS would get), would become a competitor to BTSX, and the merger is a way for BTSX to eliminate the competition by bringing everyone togethe,r I believe this premium is fair.
I am primarily a BTSX holder, and have more BTSX than PTS, so this proposal hurts me slightly relative to Option A. However, I do feel the premium is relatively fair, and is necessary for community unity, and for the preservation of the 10%/10% consensus.
It is convenient that the market caps of PTS and TBSX were such that the 10% figure gets us roughly in the ballpark of a fair settlement value. It makes it easier for the two sides to agree that at least the settlement is not horribly unfair.Other considerations:Proposed 'Lockout period'
on PTS/AGS holders new shares, where they cannot sell for a period of time:
This idea was proposed, and I am not sure if people were generally in favor or against it.
I am against it, because it is unfair to PTS/AGS holders. It would mean that some of the new BTS, given to PTS/AGS, were special shares that were less useful than the others because they cannot be initially sold.
I believe that we must all be equal in the new entity we are creating, one share is one share! (Also, this reduces technical complexity, and reduces confusion!)Proposal for PTS/AGS shares of the new Bitshares to be 'special', and not subject to dilutions that the community votes on.
This idea was proposed, that the PTS/AGS holders new shares do not get diluted.
I am against it, because it is VERY, VERY unfair to BTSX holders. It would mean that some of the new BTS, given to PTS/AGS, were special shares that are essentially much more valuable than the others, because they are not dilutable. This would mean that any time the community voted in favor of a capital infusion, it would be entirely the current BTSX holders paying for it, but everyone would share in the benefit!
Again, we must all be equal in the new entity we are creating, one share is one share! There must be no special privileged shares that the old timer PTS/AGS holders receive, that get special treatment over the others.A twist on the share counts, to help reduce FUD during the transition:
The 2 billion share count of BTSX is psychologically important to those who have only a minimal knowledge of Bitshares. (And to many of us who are more invested as well!).
In my above proposals, I had us creating 2.4 or 2.5 billion BTS initially, and then voting on whether to further increase this total for a capital infusion.
However, a better plan would be to keep the number under 2 billion, in order to reduce the amount of FUD that will be focused against bitshares.
Therefore, I adjust my earlier proposal to the following:
New 2 billion share BTS is created, with the following allocations:1.6 billion shares to current BTSX holders (80%)
200 million shares to PTS holders (10%)
200 million shares to AGS holders (10%)
This helps avoid the initial cries of 'dilution' over the merger.
I further propose the following option, which keeps the share count under 2 billion after the capital infusion:Option D:
New Bitshares entity is created with 1.8 billion shares currently in existence, with the following allocation:1.44 billion shares to current BTSX holders (80%)
180 million shares to PTS holders (10%)
180 million shares to AGS holders (10%)
Then, a vote on whether to create 200 million shares for the capital infusion for the marketing efforts, would bring us back to 2 billion total. This would help to stave off the FUD for a while.
(This proposal should be modified by bytemaster to reflect the expected size of the capital infusion!)A final note about the 'capital infusion'
The proposed capital infusion (a nicer term for dilution), will be voted on by the Bitshares holders. (It won't be forced upon us).
If we vote yes, it will happen, and if we vote no, it won't.
I expect that once we reach the point that we will vote on this, that Bytemaster and/or the marketing team will give us details on the size of the dilution, and exactly what we are buying, that is, details on the marketing plan (not just hints).
I believe it would be good for our ability to sell Bitshares to the crypto community if this dilution were to be of an amount equal to or smaller than the current Bitcoin inflaiton.
That way, we can say: "Yes, Bitshares issues some new shares to pay for a marketing campaign. BUT, Bitcoin created a lot of new bitcoins to pay for mining! Bitshares purchased something really useful with its money, AND the amount was less dilution than what bitcoin holders got due to the mining process". This would be in the order of a 8-10% inflation rate over the next year or so, and then a 4-5% rate after the next bitcoin reward halving in 2016.
Thanks for reading, I hope this was helpful, and I look forward to your thoughts.
It is important that we reach a community consensus on what is generally fair to everyone, so that we can move forward and all BTSX, AGS, and PTS holders can build Bitshares future together.