Winston Churchill made this comment about tigers, it reflected his incredulity that Britain would even consider negotiating with Adolph Hitler. The idea of appeasing Nazi Germany was simply preposterous.
I feel the same about Bitcoin Miners who choose to go public. When we get to a Bitcoin Standard, we won’t need a decadent Wall Street, least of all the drummed-up drama of an IPO.
The IPO process is corrupt and corrupting. The incentives are all wrong. When a firm goes public and it pops on first-day trading, those profits go to the Investment Banks clients or to the investment bank itself. Not the firm that built itself up in the first place. This is on top of the Investment Bankers’ 6% commission they charge, with a straight face, for the value add of getting the company through the byzantine IPO. The cap table allocation process is full of insider deals that undermine getting capital to the underlying value-creating entity, the company.
You must effectively be co-opted, by the man, to go public. You make yourself, well, public to criticisms and subject to regulatory diktats from the likes of SEC and politicians. Witness Senator Warren screechingly holding forth in her letter to ERCOT worrying about our planet and Bitcoin miners. She exclusively called out public companies. Witness Coinbase, to go public, they had to bend the knee and fully open their customers trading to KYC and supposedly the IRS. Why would they do this if they were focused just on customers? I’ll bet you can guess.
This is the 26,000-square-foot house that the CEO of Coinbase bought for $133 million. I’ll give you $5 (no real money will change hands) if you can guess if he purchased before or after the IPO. Ding ding ding, after. He has been corrupted.
Bitcoin firms who IPO are playing on the Fiat Standards home field. It’s worse than that, the Bitcoin firms are playing on fiat rules where the fiat refs are cheaters. Its like agreeing to play Calvin Ball, they always change the rules.
This brings us to the recent news about Core Scientific. They went public in April of 2021 (via a SPAC) based on being one of the earlier players in Bitcoin Mining. They had a well-respected BoD and an experienced management team. I heard their founder speak a few times and came away impressed. However, to go back to the Churchill analogy, they stuck their head in the tiger’s mouth. They operated according to the rules and impulses of Wall Street, trying to please it instead of their shareholders. They seemingly adopted the mantra of growth at all costs, opening a large mining facility in Denton, TX. They took on Crypto poster child company Celsius as a customer. They quit the revolution in favor of the perception of acceptance by the popular crowd.
Just as Churchill pointed out, you can’t negotiate with madmen whose worldview is completely opposed to you. The Fiat Standard is corrupt up and down the food chain, everyone in power is getting a cut of the action. You can be a true-blue bitcoin believer, or you can go public. You can’t be both. The most successful, by market capitalization, Bitcoin Miner, is Marathon. I don’t begrudge the CEO, Fred Thiel anything, he seems effective and articulate. However, he is the personification of an insider. He has been an investor for most of his career and is on a dozen boards.
I hope Bitcoin and Bitcoin Mining are not captured by the insiders, those well-credentialed folks who donate money to political causes and have other CEOs who always take their calls. I hope the next generation of Bitcoin Miners views Wall Street with disdain and never IPOs. I’d view that as tantamount to capitulation. I liken Bitcoiners to Jack Nicholson in One Flew Over the Cuckoo's Nest. He is ostensibly insane, but he isn’t and realizes that the management of the asylum is corrupt and broken. Going public is like the man winning and giving us a lobotomy.