Thursday, 1 March 2018

New ICO from Spice being promoted by Crowdcube - is that legal?

So now Crowdcube are licensed by the FCA to promote an ICO? 

Ignoring for the moment the benefits that are claimed by Spice's new ICO to establish a blockchain operated investment fund, why are Crowdcube involved? Is this a last ditch attempt to get the fund filled? Darren Westlake, the Crowdcube CEO who sent out the promotional email, says that - 

I want to let you know about an opportunity quite distinct to others that have previously been available through Crowdcube. 

Applauding the appalling English - what does he mean? Crowdcube are not allowed to get involved in this area but here they are getting involved anyway; using their brand to positively promote this ICO. 
Ok, so we cant ignore the detail behind this offer. What is being issued is a new coin that has an asset value behind it - the NAV of the fund that the pot of money is being invested into.

The offer which is due to close in two days, is for $130m worth of new coin in the Spice VC Fund.

The BIG claim from Spice is that in the old world, VCs locked up cash in these investments for 7 to 10 years. Now apparently this new system will allow investors liquidity - the Holy Grail has arrived.

Well no actually - not so fast. The Holy Grail may be in sight but it is still firmly out of reach.

Reading fewer of the headlines that Spice are good at pushing out and more of the detail reveals the truth.

1. Spice will be putting aside 5% of the fund to allow coin owners to cash in. However the value offered will be automatically set by the calculation that keeps the value at 5% of the fund - so for example a run will mean rapidly falling value and therefore no cashing in. It looks like liquidity but isnt.

2. The NAV of the fund will set the price of the new coin in the 'market'. Who sets the NAV is not mentioned. We all know where that road leads.

3. They state that they have no idea if coin exchanges will accept their coin. So no guarantees of liquidity here.

4. The only liquidity here is that fellow Spice holders will be able to purchase your tokens and vice versa. That is not really liquidity as the attempt by Seedrs to create a secondary market for ECF shares has so far shown.  

In fact despite the pages of technical waffle, their is no real liquidity here at all. There might be but then there might not be. Worthless.

So the whole show rests on whether you believe that the team behind Spice have a clue how to invest in what they are terming companies between Seed investment and an A round. A gap they say is waiting to be filled. Your investment whether held in Spice coin, dollars or bananas will go up and down on the back of the performance of these companies. Which is pretty much where we came in. A fund's NAV is already worked out this way. Without liquidity, Spice offer nothing new. Liquidity can only exist where there is a buyer and seller - Crypto or no Crypto.  

It looks most likely to us that this yet another outfit climbing onto the Crypto tower so that when they waive their flag, someone notices.  

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