Initial Coin Offerings

Thu, 2017/08/17 - 1:56pm | Your editor
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After Pres. Trump took credit for the good Wall Street performance earlier in his term of office, he may now have to take the blame for the downward move of US shares as a result of his break with our country's most prominent business leaders over how he discussed Nazism and racism after Saturday's events in Charlottesville, VA. But given his problems with criticism I doubt if he well recognize his own error. I think old statues are part of the landscape which doesn't mean they cannot cause distress or uplift.


Today I got a news release from Reuters about a new Initial Coin Offering, or ICO, one of a horde of new virtual currency offerings to hit the market this summer after Bitcoin hit new highs (admittedly during the week when two nuclear powers, the US and North Korea, were exchanging threats.) Bitcoins are how millenials deal with geo-political risk, replacing gold. The new offering is allegedly backed by venture capitalists from the Murdoch family, according to Rahul Soosuk, the CEO of a related company called Unikoin Gold whose assets are to be put into the new company. The release was later withdrawn from Reuters' site but not before it had been picked up by my brokerage.

Unikoin Sports Betting wanted to be the bookie for gamblers who want to punt without having to spend money on financing their bets using banks or credit cards—particularly in places where on-line bookies are illegal or limited, like the US.

I have also had a few readers ask me what ICO I recommend, so I am charging ahead today. I also got a UK promo from The Daily Reckoning whose publisher, Bill Bonner, funded the startup of this newsletter, offering a “FREE copy of a book by John Duncan, his cryptocurrency expert, called Make Money Crypto Currency Trading. This version is not available on Amazon or any bookstore.…”


Meanwhile there are crises as well in countries where markets are less than free, which also demand comment. So we will be talking about China and Colombia for a change. And drawing a lesson in stoicism from (of all places) Jordan.


China's plan to get private sector Hong Kong companies to buy shares of China Unicom, the state-controlled cellular telephone company listed on the Big Board as CHU, has been derailed because it apparently violated Hong Kong stock exchange rules. While civil rights and citizen protection in the former Crown Colony no longer apply when Beijing wants to crack down on dissidents or currency violators, stock market rules have to be respected.

The plan announced this week was to raise $11.7 bn with the issue of new CHU shares. I worried that one of our top performing shares was expected to become the second or third largest non-government company in the new CHU roster, along side other internet stars. The lead investors were to be an insurance firm, China Life and railroad CRRC. The company we own was due to own 5.2% of Unicom and it was unclear if this was to be a passive investment or lead to new linkages between telephone operating companies and the content and social media operations of high-flying private sector firms.

In the conference call earlier this week, its president answered a Deutsche Bank analyst about the plan for it to buy into Unicom blithely: “I think mixed ownership is actually a direction for the government to embrace more market governance for state owned enterprise. So, I think that has no implication on more regulatory pressure on our business. In a way it’s actually the other direction. It’s hoping that the market force can help state owned enterprise to be more competitive. “ Today he might have second thoughts.

The question has not been answered because Hong Kong suspended Unicom trading today. Trading the local Shanghai shares on which the US American Depositary Receipts are based, had already been halted in April and, not too surprisingly, the ADR stock crashed. Unicom has now withdrawn the capitalization plan temporarily for "technical reasons" but said it will file a new plan next week. More on what this means for our portfolio is covered only for paid subscribers.

Meanwhile a politically well-connected CEO of a Colombian firm has resigned for “family reasons” a few days after he presented what looked like good results for the ADR in English in a conference call I reported on. This too is presented below along with what happened to the ADR. And we revisit a former holding from Jordan to understand how markets work. And the usual suspects from around the world from Alsace to Hong Kong, and from Switzerland to Ireland, and from Sweden to Russia.

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