Kexcoin ICO: why I won’t invest (should you??)

Hello all the lovely people,

First a quick disclaimer: I like @marketingmonk 's youtube videos, I salute his efforts to educate people about cryptos and I wish him best of luck.
I learned about Kexcoin from one of his videos, he’s very bullish obviously as he’s a part of it.

For what it’s worth, here’s my opinion on the project (spoiler : it’s not worth much for investors, especially considering the risk).

So for those new to Kexcoin, you can check the white paper here: http://Kexcoin.com

For those who can’t be bothered reading the 18 page-paper, please spare a second to bless the internet, someone out there has done the work for you!

The Kexcoin ICO aims to raise USD 85M to purchase student rental property in the UK. Kexcoin holders will not directly receive proceeds from the property rental, but half of the profits (=rental income after management expenses and tax) will be used to buy back Kexcoins on the market and destroy them. The other half of the profits will be used to buy additional properties, whose income shall be added to pool and generate more profits. Rinse and repeat every year for 30 years, after which the properties will be sold and capital gains shared amongst remaining coin holders.
Initially, this sounds great: if you want to hold these coins your initial investment will grow every year as more and more properties are purchased, and fewer coins are in cirulation. With a gross yield of 8-15% as advertised, the unstoppable force of compound interest will make you rich!

According to a recent simulation published by Kexcoin (https://steemit-bucket-4a743ec2.s3.amazonaws.com/KexcoinFinancialModel-Demonstration.pdf), even with relatively bullish assumptions about the UK property market, the average investor who participates in the ICO and holds the coins until the end will see an initial $10 investment (for one Kexcoin) grow to $99.2. Not bad, but in 30 years that’s not exactly stellar.
Their simulation talks about multiplying your investment by 11.67, but that’s just not in a universe where rules of arithmetic apply.

How is that possible with such attractive yield compounded over 30 years? A simple calculation will tell you that their 12% gross yield assumption on these properties will turn your $10 initial investment into roughly $300. So where is the money going?

Well, that’s (in my view, rather disingenuously) not said explicitly in the white paper. The money given by investors will be used to buy properties, but the investors will not own these properties, the project managers will. Then, half of the profits will be used to buy more properties, again fully owned by the project managers. How about the capital gains at the end of the 30 years, when the properties are sold? Only half of these gains will be distributed to ICO participants. The other half? to the project managers!

If you like this deal,I have a similar one for you: you give me $100M (thanks!) I will use it to buy stocks. The stocks will legally belong to me. Thanks again.
Every year, I will let you have half of the dividends, then with the other half I will buy more stocks. They will also belong to me. After 30 years I will sell all these stocks, keep the initial $100M you gave me, and half of the long term capital gains. You can keep the other half of the capital gains. You’re welcome.

If you still like it, how about we make it $1b? $10b? any taker?

Well, that’s Kexcoin’s business model. Oh, and that doesn’t take into account the dilution. They will issue a total of 10M coins, but keep 1M for the project founders and 0.5M for other expenses. So the initial investor’s money will be diluted as soon as the ICO is complete. The more money they fall short of the $85M target, the bigger the dilution for all ICO participants.

So if they raise the full $85 as expected, your $10 investment after 30 years will be worth $99.2. If they raise only $20M, your $10 will be worth $20. After 30 years.

Don’t believe me? You certainly should not, I’m just a random person on the internet.
Feel free to to the maths yourself (their simulation is a good start, or you can play with this version (https://docs.google.com/spreadsheets/d/1K2IOixQtvx_lxIIYcG4i-yTAV8YJhdFB1HXl0mByzFA/edit?usp=sharing). Let me know how it works out for you.

In conclusion, I am a believer in cryptos as much as I’m a believer in the internet. Back in the late 90’s we could see the same frenzy over internet IPO’s. You could raise millions with any “.com” business idea. Most of these crashed and burned in the early 2000’, but the few that survived changed the world. I believe the same will happen for crypto currencies and blockchains. So, which of these two fates awaits Kexcoin??

PS: The additional risks linked to this project (not mentioned in the white paper):

• Forex risk (british pound devaluation). Could take a huge dent on the returns for non UK-based investors.
• Using Bitshares: is the platform going to survive for 30 years? If so, are they sure to find each investor after 30 years to give them their money? Will you still know your bitshares account details in 30 years to claim the money?
• Needing your money early: if you are forced to sell your coins early you will get back pennies on your initial investment dollar. Just as an illustration after 10 years of great business according to their optimistic expectations the project will only have repaid back half of initial investment to kexcoin holders.
  -Murphy’s law: their assumptions are very optimistic. Projecting rent increases in the UK of 9% per year for the next 30 years? Really?

PPS: I am not a financial advisor, I couldn’t be if I tried. I do know that salespeople often lie, numbers don’t.