Consider this a forewarning of how your own altcoin might be f…ed by the team you trusted later.I always liked the dividend part of Modum. But just a few days ago they publicized a proposal to convert all tokens into shares. Sounds good right? Certainly not! I feel misled and betrayed. How can you be sure your altcoin will not end up the same?TLDR: skip to the second last paragraphFirst some short background to ModumThe Mod token has, according to their whitepaper, 100% dividend rights. All shareholders forfeited their dividend rights during the token sale. Reaching certain milestones would unlock tokens for shareholders, and would thus help align interests of both tokenholders and shareholders as the latter group would also have tokens. Never mind that many shareholders later dumped their unlocked tokens to further complicate the issue we now are facing. To me it looks like shareholders in Modum realized their shares were not worth as much as they could be without dividend rights. So they decided they wanted to improve their situation. The public reasoning behind the proposed swap is something else of course, but while that reasoning may have some merit, actions speaks louder than words. Now keep in mind Modum was financed almost exclusively by ICO funds. That means all activity conducted by Modum was made possible due to ICO funds. Whatever asset gains made thus originate there. Although the fruits are worth more than the seed now, it all nonetheless started with the seed.Now, here´s where it gets ugly. Although the ICO financed from what I can gather minimum 90% of the company Modum wants to convert those tokens into shares at an incredulous rate. With Modum´s proposal all the Mod tokens which together hold 100% dividend rights will, when converted, only equate to 16.21% of the shares. That means the founders + those who financed less than 10% of the company in sum gets more than 84% of the shares (when you include the unlocked tokens the % will be higher). To justify this, they pretend the current price of the Mod token, which suffered from Binance delisting, hardly any liquidity, a general bear market, etc. is long-term representative of those dividend rights.How did they calculate this ratio of 16.21%? There was an AMA in their main Telegram channel 6 PM local time 25th. July where they were asked repeated questions about this, but no proper answer was given, only half-answers (the most critical questions were all ignored or not properly addressed – what a surprise! it actually was a bit of surprise for me, I had always held the team in reasonable high regard, of course not anymore!). From the proposed swap faq and those half-answers we know that they took the average market cap of the token from the first half of 2019 in one hand. Then they took the value of Modum´s company assets by the end of 2018 in the other hand (they wont disclose the actual calculations though so we cannot know if that value is inflated or not). The first number is low, the second number is high. And voila, token holders are screwed.What we do know however is that Binance delisted the Mod token in February this year and that price and liquidity plummeted after that. + it´s been the bear market. + there are P&D groups who manipulate the price and traders who don´t give a rat´s ass about what they are trading as long as they can make money out of it (I have nothing against traders, just trying to make a point). The token ATH was around 12 USD (why not use that price right, since the situation has only improved from there). Everyone in Crypto knows prices are speculative, and when liquidity is low price is even more volatile and unrepresentative. Real price discovery would probably not happen until dividends were actually disclosed. The point being that the price of the Mod token (and tokens in general – my opinion that is) is at a too early stage to be used to accurately asses both current and future potential/utility of said token. Risk is still high, and price reflects this as well. Long term hodlers didnt mind this fact since future dividends is irrespective of token price, but tied exclusively to token performance! Clearly Modum knows this, but they take advantage of the low price to argue tokenholders should go from 100% dividend rights to 16.21% shares. It takes 9 tokens to get 1 share according to their proposal. That means the price of the share has to be 9 times higher than the token price in order to break even. If that´s realistic or not we don´t know, since Modum wont disclose any numbers or estimation of share price. If you want to break even against ICO price the share price would have to be many times higher than that again (at today´s prices). The potential upside of 1 pure dividend token should be much higher than the upside of 1/9th of a share, obviously, so this proposal sucks!Somehow Modum completely neglects the fact that all their current assets grew out of the ICO funds, so at the very least the dividend rights should be valued at the amount of money the ICO brought in + a risk premium. But Modum instead values dividend rights at a fraction of shares´worth, based on their own subjective calculations. How arrogant and ludicrous is that? Of course, this question, although repeatedly asked during the AMA, has not been answered by Modum.Now, I think a conversion from dividend-rights to shares can be a good thing, but I think the conversion rate is too low. If this rate is the only offer, I´d rather keep my dividend rights. But the problem is our vote may not count, unless we can successfully mobilize enough token holders to vote. Which I think will be hard due to holiday season, short time frame, forgotten tokens on Binance (please vote “No” if you can Binance), many small fish who might not care, etc. Another question is the legality of the vote itself, both according to the whitepaper and the apparent conflict of interest since they came up with the proposal, they get to vote, they have incentives to marginalise us, no independent third party has been involved in the process, no calculations have been given to us, etc.How is this relevant for the wider crypto community? What if the altcoin projects/companies you are invested in suddenly wants to go the STO-way? How will they convert tokens into shares? Are you sure you can trust the integrity of the team, or might they try to f… you over like Modum try to do with us? What if they want to hold a vote? How can you be sure the vote will be fair and not a fox in the hen house situation. Stay proactive and read the terms of your investment carefully and probe for possible STO-conversion of your token, and if so, its terms.And if anyone knows a good crypto lawyer in Switzerland, please give comment below, as, as you can probably guess, I hodl some of these tokens and will not put up with this arrogance +++
Submitted July 26, 2019 at 08:41AM
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