Steer well clear of Kodak’s crypto offerings
Kodak announced a new blockchain strategy last week and saw its share price near-quadruple as a result. But investors should tread carefully.
Kodak is embracing the blockchain. The former photography giant announced its "two-pronged" blockchain strategy last week and saw its share price near-quadruple as a result. But does Kodak's new vision stand up to scrutiny, or have investors jumped the gun?
Prong number one is a partnership with WENN Digital, a UK paparazzi photo agency, to build an image-rights management platform called KodakOne, aimed at making it "significantly cheaper and faster to register, move and sell digital images". A new cryptocurrency KodakCoin will be used to make and receive payments. Kodak hopes that photographers will flock to register their works, and when an image is used, the creator will be paid in KodakCoins.
In theory, this sort of digital-rights management (DRM) is a good application for blockchain technology (the blockchain is effectively a giant database that records and verifies transactions as they happen without an intermediary getting involved). But there are already lots of start-ups in this area. A legacy brand like Kodak particularly one which famously failed to adapt to a previous technological shift, the move from film to digital will not necessarily have any advantage.
A bigger snag is that Kodak, as a listed company, has to be rather more careful about the legalities of initial coin offerings (ICO) than others have been, so it is issuing KodakCoins in line with the US regulator's rules. The upshot is that only "accredited" investors will be able to buy them, which in turn means that, as Matt Levine notes on Bloomberg, "you should not expect to be able to easily and quickly resell In fact, you should expect to hold the securities indefinitely." And if you can't cash in your KodakCoins, what is the point?
An eyebrow-raising proposition
But it is Kodak's second "prong" that has really raised eyebrows. Kodak has licensed its name to Spotlite, a company that makes bitcoin "mining rigs", the specialised computers used to verify transactions on the bitcoin blockchain. Last week, it unveiled the "Kodak KashMiner", which will be available to lease for a two-year period for around $3,400. Kodak will power the rig with electricity from its own coal-fired power plant, and take half the revenue earned from the mining process. Kodak claims investors will earn $375 a month at current bitcoin values.
That, says blockchain blogger David Gerard, is nonsense. You can already buy a rig for $2,320, and even then, you would need "super cheap" electricity just to "come out ahead mining bitcoin". So, he says, "I can't see how anyone signing up for a Kodak KashMiner can possibly make back their money over the life of the contract". In short, this looks more like cryptomania rather than the return of Kodak.
News bytes P2P defaults on the rise
Everledger is "one of the first blockchain start-ups to actually do something useful", says Ian Allison of the International Business Times. The fintech company enables diamonds to be traded transparently and securely by analysing them individually and giving each a "digital thumbprint" and tracking its movement via a "hybrid" model of public and private blockchains. So far, it has recorded more than 1.8 million stones. Now it has partnered with Switzerland's Gbelin Gem Lab to expand its service to coloured gemstones, too, to provide a "reliable history of an asset's authenticity and ownership". Everledger uses Hyperledger, an open-source blockchain and smart-contract platform. It hopes to expand the service to assuring the provenance of other high-value assets.
Wealthsimple, a Canadian digital wealth manager (or "robo-adviser") with more than 50,000 clients and £1bn in assets under management, has launched a series of socially responsible investing (SRI) portfolios, reports Daniel Lanyon on AltFi.com. Wealthsimple uses "smart technology with a human touch" to build portfolios of low-fee, exchange-traded funds. Its SRI portfolios screen for companies with strong corporate governance, fair labour practices and which advance "cleantech" (energy efficiency) innovation. Wealthsimple's SRI portfolios have a minimum investment of £5,000 and the annual fee is 0.7% on the first £100,000, and 0.5% thereafter.
Ranger Direct, a London-listed investment trust that invests in peer-to-peer loans, reported a rise in defaults in the third quarter, mostly from property investments, which make up 30% of its portfolio, says Marc Shoffman on P2PFinanceNews.co.uk. In the quarter to the end of September 2017, Ranger reported that, of 8,076 current investments worth $270m, 679 loans with a total value of $6.2m were late, while 305 worth a total of $20.7m were in default. Ranger invests mainly in secured business loans, mostly in the US. In the past year the share price has fallen by nearly 25%.