Will Asset-based Coins Replace Small Cap Stocks?

Cryptocurrencies, Investors, News

Kevin O’Leary, co-founder of Softkey Software Products, has appeared on CNBC’s YouTube channel to suggest that cryptocurrencies might replace small-cap stocks. O’Leary, an Irish Canadian businessman, is known to many from his appearances on various Canadian and US television programmes. He was previously involved in the Canadian version of Dragon’s Den before moving on to the US franchise of the same programme, known as Shark Tank.

Wikimedia Commons: Kevin O’Leary

He is reported to be worth over $400 million, much of which was made when Softkey bought out The Learning Company (TLC) for $606 million and was then sold on to Mattel in 1999 for around $4 billion. $400 million is incidentally the amount he is hoping to raise in April 2018 from an SEC-approved sale of part of a “well-known” New York hotel. If he pulls it off, it will be the first blockchain-based purchase of a New York hotel. The plan is to use a smart contract to allow investors to buy one-third of the hotel, which would value the whole hotel at $1.2 billion.

Unlike ICOs, which are often token sales for a project that will not be completed for many years, if at all, this is a prime real estate plot in New York with guests paying hundreds or thousands of dollars a night. Investment bankers regularly charge between 5% and 7% commission when they raise finance for deals of this nature. No doubt they will be looking on anxiously in the hope the blockchain based sale comes unstuck.

Over the last year, investors were happy to throw money at many of the ill-conceived ICOs, so you would think this bricks-and-mortar sale would be a safe bet for O’Leary. Not necessarily. Many ICO investors were looking to double or treble their investment within a few months or even within a few days. Over the years, property values have shot up in New York and will probably continue to do so, but not doubling and trebling in price within a few months.

The asset-based sale is subject to a non-disclosure agreement (NDA), so O’Leary wasn’t able to say which hotel is looking to raise the $400m. The Waldorf Astoria was sold in 2015 for almost $2 billion, so I think we can discount a one-third share of this hotel being up for sale at $400 million. Other more serious contenders are The Plaza, Park Lane Hotel, PIA Roosevelt, and The Langham, all of which are worth upwards of $1 billion and have been on the market in recent years. Park Lane Hotel was sold in 2013 for $660 million, and late last year it failed to receive bids above the $1 billion price tag.

The Plaza was sold by the current US President, Donald Trump when he was close to bankruptcy in 1995 for $325 million. Like many hotels, the Plaza is not owned by a single entity, and in 2017, one owner, who has a 25% stake, said they would not be selling their share. One-third of The Langham was sold in 2014 to Melendez International Hotels. Is it perhaps this share that O’Leary is looking to sell?

Regardless of which prestigious hotel it is, it’s likely to be a significant boost for blockchain technology if the sale is a success.

 

Financial analyst, smartphone app designer, technical writer, and crypto enthusiast. Blockchain verified graduate of MOOC 9, DFIN-511: Introduction to Digital Currencies, run by the University of Nicosia.

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