Public Companies and Tangible Assets (NFT’s)

September 8, 2021

Transitioning From Private to Public Companies

Public companies offer growing businesses improved liquidity for more complex operations. Just like in the example above, funding ongoing investments puts a large burden on private investors to continually fund. Yes, they receive higher yield payouts but they carry more risk of zero yields if operations continually fluctuate or revenue transactions become sporadic.

In this case, by providing the public access to a brand’s asset the company gains more ability to always have their asset at its peak capital to debt ratio. As a requirement for becoming public a regulatory body would need to look at how many transactions are occurring for a given asset and how frequently positive yields are being generated.

Size of capital no longer plays as much of a role as investors would only be able to place their investment up to the debt to capital ratio. As the brand makes more money, new investors would be able to purchase higher and higher allotments of a brand’s asset. However, the allotment of cash to capital would be saved, again, as a ratio of ownership. This means the purchase of a $5 brand asset of a $500 brand would represent 1% yield ratio. Even if the asset slipped to $400, no yield may be paid but the entitlement towards 1% of profit still remains.

As investors continually look for highest yields of their money, a brand not producing any yield is seen as a negative. However, by investors leaving their equity positions and moving to another asset they allow other investors to jump into the equity allotment at a reduced principal. Just like in private companies, investors may not be reaping yields daily but they understand their allotted ratio would perform in the future which would still incentivize buying throughout spurts of low, positive transaction volume.

How companies handle accounting of operating expenses would change in this model, though. As private companies with lower transaction volumes, ongoing operational expenses could be recorded against the primary asset. Without the pressure of public markets looking for continual yield, this is ok for private businesses as investors would be in the know of operating fluctuations. However, as a public business and with operating expenses being the key driver of yield success these efficiencies would need to be public.

Just like with creditors having operational overhead, public companies would have a fee associated with each yield payout. This public fee would be the overall daily sum of all operating costs to the business. In essence it’s the automation of calculating net profits to be paid on an ongoing basis.

This would be done by the brand’s asset recording all operating expenses as special flagged attributes. This would mean that although they would appear as expenses, they would not negatively affect the price of a brand’s asset. They would instead be totaled and relative to an asset’s price, be given a fee. Once paid/interest is given, the flagged operating transaction would be marked as paid.

For example, a company’s base asset is valued at $100 which is also at its peak ratio set by the government. Raw cost of goods towards creating a product for that day total $50 bringing the price down to $50. In a private firm, pending the need for funds could be allocated from an investor but because this business is public, an automated market maker would allow investors to immediately fill the quota back to $100 and divvy out yield ratios accordingly. As the sale of the item would net $75 the overall value of the asset would now reach $175. Flagged operating expenses totaled $60 for the day. This would then result in 75% interest pay out but with a 2.92% fee meaning the net payout percentage would be 72.08% relative towards the amount of money investors initially funded.

However, maybe this company only sells the product periodically. In the same example there may be days where no sale is made. Say 3 days go by. Because of the market makers, the asset price remains at $175. But on the 4th day another sale is made for $75. This would now drive the asset to $250 triggering a raw interest pay out of 70% but due to now 4 days of operating expenses being unpaid the fee climbed to 4.2%. So, over 3 days no payments were made but on the 4th, 65.8% interest was paid.

You can then start to see the incentive for companies with large raw materials to go public as it allows a steady stream of income for keeping supply chains armed with what’s needed. Simultaneously, due to the debt ratio cap it, again, ensures that companies only take on the capital needed to provide goods with investors then incentivized to keep the narrow rations full.

Low Transactional Businesses Highlight Market Timing Criticality

Public companies due to their operating expenses as fees could theoretically operate for years without yield given certain industries. For instance, a jet engine manufacturer could spend years of research and development before finally turning out an engine for transaction. However, they still have to pay for their ongoing costs. These would have to be the rare public companies using the private sector’s accounting standards, one that allows operating costs to be reduced directly from the asset price.

Although they would only provide yield every so often, the yield on which they would be producing would be staggering. In times of no yielding, these companies would lose some of their asset value due to investors leaving. In addition they would lose capital for both their raw material costs and operating expenses. Due to this the government would likely offer them a higher debt to asset ratio as it would give them a longer runway in these periods of no transactions.

However, there would be an inflection point for savvy investors. Again, due to lack of yielding most automated market makers would stay away from these assets. Because of this, though, debt to asset ratios would also be low allowing investors to build their yield margins at cheaper prices. Timed right a lower capped asset would yield even greater returns if a positive transaction were to occur.

This would be great on many fronts as it incentivizes informed investors by allowing them higher margins when many companies would need their support the most. Savviness in this respect would be being able to not only find a yield but being able to allocate assets away from other continually yielding assets to see that this would yield even greater returns in the longer run even if the yields only occur infrequently.

Tangible Assets & NFTs

Tangible assets such as real estate, machinery and automobiles would add into a firm’s asset valuation. However, each category of asset would be its own asset chain assigned to a business. The reason being is that, pending category, each asset would have its own accounting rules set by the government for depreciation. By properly flagging the asset would immediately enable the global accounting rules for said asset.

What this means is that a purchase of, say, a manufacturing machine’s price would be transacted on their primary asset as a positive transaction. The brand would then have a new asset enabled under its account representing its purchase.

The machinery, however, depreciates based on the hours of operation that is in use. These hours of operation or other variables pending asset type would then be their own transactions within the asset. In a hyper connected IoT world, this information would be transacted directly from the device to the ledger but until everything would be connected, could be updated manually.

When each transaction would log against the asset, its fee would be weighted relative to its overall life expectancy. The fee, then, would reduce the overall value of the asset causing it to be reflected within the primary asset’s value.

However, tangible assets can always easily be sold on the open market. Older muscle cars for example, despite having miles logged against them may appreciate on the open market. This is why asset categories become so critical. By having fine tuned categories such as make, model and year of an asset, you allow market transparency into exactly what each one would be worth within the market.

If a car of the same specs sold for $XXX then prices would automatically adjust within a business’s primary asset relative to its unique wear and tear regardless of whether it was their asset sold or not. It’s real time fact checking of asset valuations based on real time market movements.

This is exactly why NFTs or non-fungible tokens have become so critical. By listing a product on a single chain you give it a truly unique identity. Marketplaces then, whether eBay, Amazon or Walmart, would then be able to give you the exact same information or ability to buy or sell. These brands would then be differentiating themselves through user experience by enabling of assets they ultimately choose to support. They’d be competing over who could offer the lowest fees for transacting. The leaner they build themselves on top of protocols, the lower the fees they’ll be able to provide.