What are Ginko Bonds worth? - 2

Absolutely.

Qie, you're right. Ginko depositors should have actually received 4 bonds with a (face/nominal/virtual/par/whatever) value for each 1L they had deposited.

Which is why I think WSE wouldnt let him buy the bonds back on the market for less than 1$L.

Him doing so would be taking advantage of the people he owed money to by getting them to accept less money than he promised them to get out of the deal.

Of course I think theres a lot of people whod love to get 50 or 75% of their previous Ginko account ammounts back. But thats a bit different.

Chances are, he knows that he invested in some wildly risky and possibly illegal things and that might drive the value *down.*

The only reason the bonds were worth .25 of the face value is that Speculators were buying peoples debt for 25 cents on the dollar.

If he gave them 4 bonds for each 1L they would have invested, instead the market price would have dropped accordingly.


25% was all speculators were willing to pay for Ginko's debt, they didnt have faith Ginko was worth more than that.

Considering Ginko disclosed only about 25% of its assets .. That makes sense.

Perhaps. But the fact is that at the time of conversion the "bonds" were already being valued at 0.25. Ginko could have written "I am a banana worth 10,000L" on the bonds they were still valued at 0.25 and it would have been fair to give depositors 4 of those banana bonds.

No, I really think that's letting him off too easily. The bonds were *issued* at L$0.25 (adjusted for the split)... that's the amount of debt Ginko assumed with each GPB it issued in the original offering. And, before the bank conversion, the market price hovered right around that value, suggesting that the dividends fairly rewarded the risk at that price.

The fact that the market can't currently support even the L$0.25 value of the original issue shows that the current dividend doesn't adequately compensate even the original-issue bondholders for the risk the market currently perceives. (It also doesn't help that the dividend interval was extended from monthly to quarterly. Pretty convenient perpetual bonds, these GPBs.)

What I mean is those bananas would promptly have dropped to be worth 6 cents.

Becuase the valuation of the Bonds was nearly exactly in line with Ginkos known Assets

Ginko Owed 190 Million.

It disclosed 47 Million in SL assets.

47 Million is about 25% of 190 Million.

So Speculators were willing to go as high proportionally as the amount of assets Ginko was proven to have.


No matter how many Bonds there were - there still was only 47 Million Lindens that people Knew Ginko had (the rest was a gamble)

Therefore the Market Value of ALL the bonds would have only added up to 47 Million L if somehow the price remained flat. ( I realise it wouldnt have)

Since then confidence has sagged considerably. Ironically the Value is now 10 Cents. Which is what Nick sort of said is held directly at WSE in that post I quoted. Perhaps people trust WSE but no longer beleive that the rest of the assets would be liquidated in a further crash.

Well, yeah 'cause they were rotten bananas in the first place.

The Bonds werent really issued at 25L though.

They were Sold to Depositors for 100L of their account balance, who then sold them on the Market for $25L

If no-one wants Ginko's bananas I still have some coconuts.

No, Colette the bonds weren't sold to depositors. They were shoved down their throats.

Not at first.

At First when the Bond thing started, Depositors were given the option of Converting part of ther account deposit into Bonds at the Face Value.

So for 100L of account balance you could get 1 100L Bond.

Which you could then sell on the market.

Which is what people were doing becuase they couldnt withdraw funds any more.


The split to 1L Bonds and the concurrent ramming down of the throat hadnt happened yet.

You're absolutely right, John. If these things really could be compared to rl, this conversion would never have been able to happen.

lol who said anything about Nigeria?

This is what Nick said when I asked the same question about selling Depositors the Bonds for far above market rates.

Think its a birds of a feather thing.

I think I might be seeing your point, but the *way* I'm able to see it is pretty complicated.

There really were bonds issued at L$25, originally, and generated cash debt for Ginko at that rate. GPBs traded at that price for a couple of months.

Then the bank deposit conversion happened, at a volume that indeed swamped the size of the original GPB offering. Those deposits converted as if the original unsplit bonds had been worth L$100.

It's just possible that Ginko Guy hoped that, by using that conversion rate, the market would value GPBs *higher*--more in-line with the value of the deposits converted--with the appealing side-effect of rewarding the insiders who made up the bulk of the original-issue GPB holders.

But the problem with this is that bonds are valued in the market by how well the dividends reward the risk assumed by funding the underlying debt. And the market evaluated the dividends paid by GPBs against the risk of Ginko debt to be L$25 per bond.

Arguably, the conversion of the bank deposits may have made GPBs an almost completely new debt instrument. Indeed, Ginko had just converted by fiat a vast amount of cash obligations into bond-backed debt (and at a huge market discount, even) so all other things being equal that should have reduced Ginko's risk. But instead, of course, all other things were going to hell in a handbasket.

So, yeah, all that really matters now is how much Ginko Guy decides he wants to pay, from whatever remains of Ginko's assets. And really, one way or another, pretty much all the posters to this thread have come around to more or less that perspective, I think.

These were the ones where 87% were owned by Ginko. This was the injection of money that was being used to fend off the run, right?

Since its mostly Ginko, I just figure thats another case of them paying themselves out of the fund. Obviously they have done so much to earn their wages, after all..

Around this time or just after it was OPTIONAL for account holders to buy Bonds for 100L from their account balance.

They could then sell the bond. This was recomended by Nick as a way to bypass the Que.

These were 100L bonds that were selling for @26L on the market price. They quickly dropped to about $17.



Sounds like you are saying the Bonds that were sold to outside investors for 25L (mostly Ginko people) were valued at the same 100L rate as those that were "bought" by people with their account balances (or those who bought bonds from them)

Then all these Bonds were split into 1L Bonds-

Then all the remaining debt was convertered into 1L Bonds

I know you want to go by what NP has said in his screw-up or lie in his previous announcements, but it does appear corrected in the prospectus:

"
Chairman's Letter

Ginko Perpetual Bonds are non-expiring bonds which yield L$0.01 per month each. The yield is guaranteed by Ginko Financial so your risk is minimized, though not completely eliminated. While the bonds do not expire, it is possible for the company to cancel them by paying a liquidation dividend of L$1 per share. The yield will not rise or fall because it is guaranteed by Ginko Financial, but the risk of bankrupcy still exists.

UPDATED DUE TO BOND SPLIT"


There is not a word about "face value" there.

EXACTLY!

All this talk of "face value" is bull-dookey.

Did any interested adviser get a notice from Ginko that they have the option to buy GPBs with their deposits before the split?


*hears an echo*

He uses the term in these quotes - And others. Im guessing some people either came late to this party or have short memories.







I do not see what this obsession is with trying to tell me Ginko hasnt called the 1L$ figure the Face value. I have proof it has. YOU WILL NEVER EVEN IN 1 MILLION YEARS convince me Nick P didnt say that first the 100L was the face value then after the split 1L was the face value becuase he certainly did.

If you have hangups calling it face value - W/T/F/E - Its besides the point.

If you want to call it par value, reedemption value or banana value it doesnt change the face that that the BOND represents ONE LINDEN worth of Debt.

You are the only one having an issue with the term "face value" - and the one thing that is consistent is that he is paying exactly as described above, which is, as Colette quoted, what he called face value of the bond. Because to HIM, he has to pony up a liquidation dividend of 1L per share. What Joe Blow pays for the bond doesn't mean a hill of beans to him.

I'm not calling it anything else but a screw-up or a f'n lie.

HE said it right in this Forum - before the split and the forced conversion.