FRMO Corporation (FRMO) Earnings Call Transcript & Summary

Good day, and welcome to the FRMO Quarterly Conference call. As a reminder, today's call is being recorded. At this time, I would like to turn the conference over to Ms. Thérèse Byars. Please go ahead, ma'am.

Thank you, Connor. Good afternoon, everyone. This is Thérèse Byars speaking and I'm the Corporate Secretary of FRMO Corp. Thank you for joining us on this call this afternoon. The statements made on this call apply only as of today. The information on this call should not be construed to be a recommendation to purchase or sell any particular security or investment fund. The opinions referenced on this call today are not intended to be a forecast of future events or a guarantee of future results. It should not be assumed that any of the security transactions referenced today have been or will prove to be profitable or that future investment decisions will be profitable or will it equal or exceed the past performance of the investments. For additional information, you may visit the FRMO Corp. website at www.frmocorp.com. Today's discussion will be led by Murray Stahl, Chairman and Chief Executive Officer; and Steven Bregman, President and Chief Financial Officer. They will review key points related to the 2021 second quarter earnings. A summary transcript of this call will be posted on the FRMO website in the coming weeks. A replay of this call will be available for 1 month, beginning at 7:15 this evening. To listen to the replay, the toll-free domestic number is (888) 203-1112. The international toll number is 1 (719) 457-0820. When prompted, key in the passcode 6361035. These dial-in numbers are noted in the FRMO press release dated January 14, 2021, which may be found on the FRMO website by clicking the link called Information Statements & Announcements. The press release can also be viewed on the OTC market's website by typing in the ticker symbol FRMO and clicking on the news link. And now I'll turn the discussion over to Mr. Stahl. Go ahead.

Okay. Well, thank you for Thérèse, and thank you for everyone for joining us. Now I should tell you at the outset, I think we have the record number of questions. I haven't even seen the questions. They're going to be read to me. I think we had a record number of questions. So to get through as many as I possibly can. I hope I can get through all of them. I'm going to abbreviate some of the prepared remarks and the -- with -- is trusting that a lot of it will be in the questions. And I'll try to work what would have been prepared remarks into the questions. So as always, I saw over the balance sheet. As you can see, our financial position, it'd be a lot more meaningful if it was November 30 to August 31. On the financial statement, I guess, probably properly the way it's done. It's November 30 to May 31. I mean, it looks like this is the record shareholders' equity. If I'm wrong, I can't be wrong by much. When I look before, I think it's a record shareholders' equity we ever had. And the things that we were -- that we are predicting to happen, have yet to happen and may never happen. So as you probably know, we've repeated endless times. The investments we're making are those that would benefit from inflation. The biggest investment we have is actually on cryptocurrency, although it would benefit from inflation, in my view, because investment we have in a singular sense is the investment in HK Hard Assets. Within that, the biggest investment is Texas Pacific Land Trust. And within it, we're not ready to talk about, there are other investments that we're making. So we intend to keep building up HK Hard Assets. So what's the common theme? The common theme is the term hard assets is not a general term. It's a very precise specific term. It refers, and I think this is important, to those enterprises that derive their revenue from the asset itself rather than conventional products or services. So for example, it's a very big difference we've seen, let's say, Texas Pacific Land Trust and ExxonMobil or Chevron. Because theoretically, a hard asset could collect revenue have very little in the way of expenses, only those that are discretionary, absolutely necessary. And they're not inventing new products and services, they're not doing R&D as a generalization with some modest exceptions, they're not investing in plant property and equipment. And the trouble with a general enterprise even before you get to inflation is, everything eventually becomes obsolete those are products, those are services. You need to do R&D to develop new ones. You need to try to best your competitors. That's always possible you to replace aging plant equipment. If it's real estate, sooner or later, the property in question degrades and capital expenditures are needed. And you never know, if you're making decisions of that type, if it's the right decision, it could easily be the wrong decision. And ultimately, since no human being is perfect, sooner or later, the wrong decision is made. Sooner or later, there is an incorrect capital allocation decision and across the company, and the company has to recover. Our hard asset doesn't have that characteristics. So even in the absence of inflation, really, there are no major capital allocation decisions that need to be made. There are, of course, minor capital allocation decisions. But the earnings are essentially free cash flow. So how do you compare the earnings of a hard asset to the earnings of, I would say, conventional incorporation and conventional asset? You can't -- in our estimation, you can't nearly place some multiple on them because not all the earnings will ever be available to the shareholders. Some of it, in some cases, a lot of it needs to be reinvested back in the company. So it's much more, I think, reasonable to compare companies on their cash flow. But even that, in a hard asset sense is not necessarily a proper comparison. Because the hard asset contains a certain amount of optionality, meaning that if the -- usually, it's a commodity, that's produced. The commodity in question were to rise in price, the free cash flow would rise proportionately without any incremental investment. That doesn't happen in a normal corporation. In normal enterprise, if it's desired that the free cash flow should increase, investments have to be made. Now some companies need to make more investments than others. They were fixed asset investments. There are others that just require the hiring of people. But nevertheless, they're all investments, even though the accounting treatment is very different. So that's the idea. The idea is the same idea we had when we started Horizon that we're going to try to make as much of the profitability, free cash flow that's available to buy the same assets over and over or again. And eventually, those assets, even in the absence of inflation will provide a fairly robust earnings stream. So we have an investment stream that's working on our behalf. Even if the underlying expected variable, in this case, to remind you, inflation, is not operative. So one of the interesting things is, you can see, if you look back over the years, our cash balance, even though it fluctuates from time to time, it's actually -- for a company of this type, it's actually fairly big. And if you look at the investment line, basically, it's been built up over the course of many years while maintaining a fairly robust cash balance. We've done it without any meaningful amount of debt. We have a mortgage on a property that we bought to basically house some of the cryptocurrency operations. We also have a small equity interest in those cryptocurrency operations, and we did for strategic reasons. In addition to giving us an outlet, to host some of our mining activities, we don't want to be completely dependent upon third-party hosting companies. It also has a repair business, which means repairing cryptocurrency servers. Those are machines actually doing the mining work. So we have minority interest in the operating business. The repair business is really important. At the moment, these machines are very expensive. If a machine breaks down, actually makes sense for most people to repair it. There might come a time as we move closer to the bitcoin having where it makes less sense to repair those machines. But -- and we might be able to acquire fairly extensive inventories and parts and build our own machines. And we have had some experience with that. As you well know, last couple of weeks, the prices of the machines are very high, and therefore, the price of commodities are high, really have made any efforts to build any machines, but that will change. In one of the compendia that we write, you'll find a fairly detailed exposition of the math of how many actually works and what the payback period is for these machines. And I don't want to take up a lot of time, unless there's a question about in this introductory remark. So in any event, this was a quarter where everything was working in our favor. I expect that as the infrastructure builds out, for cryptocurrency, that it's going to be a wonderful experience for many, many years. I don't think there's any gain around the fact that in his effect that there's a lot of money creation all around the world in virtually every currency, and the currency is indeed being debased. And as far as our hard assets go, you can -- you know what they are. You can look at the earnings statements and just they relate to energy. But just understand that last year, I think it's a true statement. I think it doesn't require a lot of support. That last year was the greatest energy depression that I've personally experienced, and I've been doing this for -- since 1978. And it may be the greatest energy depression ever. And that might include actually the great depression. And if it falls short of that, it doesn't fall short by much. Then look at the hard asset investments. And look at the profitability and how robust it is. This is a bad environment. And you imagine what might happen if we ever got to a good environment. Which one day will come and will come because the world is simply not replacing its hydrocarbon reserves. And the world needs it. And I don't see an obvious substitute. There may be some questions about alternative energy, which I'll address if there are any, in the Q&A session. So the event, we're very happy with what we've done. We intend to maintain the same capital structure maintained throughout. Little by little, we intend to keep adding to our investments. A couple of things about Horizon Kinetics. And then I'll go to questions and answers. We actually established a inflation beneficiaries ETF. We launched it last Tuesday, so I guess, it's been around for a week and 2 days. And if I'm not mistaken, I may be off a little bit on the funds raised. We raised about $18 million, I maybe off a little bit on that number, but I think it's about $18 million. Not bad for this small amount of time that it is. And it turns out that if you look at the list of ETFs, which is very broad and extensive list, I don't think you'll find any other inflation beneficiaries, ETF. So we're there by ourselves, which is a posture, we become well accustomed to. And we hope this is not the last ETF that we launched. There are a lot of advantages to the ETF structure. And one final point, and I'll ask Steve, if he has anything to add to our prepared remarks. When we say ETF, we almost always use it a synonym for indexation. This ETF is an actively managed portfolios. So We're using the ETF structure, which is far more cost-efficient than the conventional mutual fund structure, but this is an actively managed ETF. So one of the things I've written about from time to time is the rebirth of active management, rebirth of active management in an operational context, that more properly services, the world of active management. So maybe active management ends up gravitating the ETFs, and there'll be the struggle for market share between actively managed ETFs and passively managed ETFs. Obviously, at the moment, the passive world has in the ETF community, probably at 99.9 something percent market share. So obviously, active management has a long way to go. Because the idea behind ETF, is the idea of indexation. And the idea of the indexation is why should I not have a diversified portfolio? And I promise you, this is my last point, but I can't resist making it, I make it all the time. Well, it's just not diversified anymore. I read some numbers, and then I'll invite my colleague to opine. These are what I consider to be technology companies or growth companies. And these are the weights in the S&P as of this morning, probably higher today. Anyway, just to read them, Apple, 6.48%; Microsoft, 5.21%; Amazon, 4.27%; Tesla, 1.98%; Facebook, 1.97%; Alphabet A, 1.74%; Alphabet C, 1.68%; Nvidia, 1.02%; PayPal 88 basis points; Netflix, 80 basis points. I can keep going there others like Adobe or salesforce.com or what have you. Add those numbers up, and you will see the S&P itself is developing a very, very large concentration. Use of the mines may differ as to how large that concentration must be before one can make the assertion that it's no longer diversified portfolio, but it is still an index. But we're approaching that point. And the people want to be diversified, that means they have to be in something else other than the heaviest concentration is. In any event, if I hold this technology, it's the heaviest concentration technology I've ever seen, inclusive of the Internet bubble of the early part of 2000. And with that, Steve, if you'd like to add to what I said. So I invite you to opine.

Yes, I'll add one tiny bit. I'm preparing for our quarterly review/webinar tomorrow. And I was looking at some of the very same things you were. We're having the same discussions at the same place where we work. So just to add to your observations about index concentration. People get this impression, we don't like technologies. I ignore the technology this time. I just -- I looked at the index a little different way. So in the S&P 500 has looked at the top heaviness. And it turns out that out of the 500 companies, just the 2 top ranking companies, they happen to be Apple and Microsoft. They have a combined weighting in the S&P 500 of a little over 11%. And the bottom 250 companies, 50% of the S&P 500 by a number of names, account for about a little over 11%. So in that sense, with respect to the ideals of the animating idea behind indexation, which just had a broad diversification to expose you positively to all the various aspects of an economy and to protect you from the vagaries of risks like changes in regulations or taxes or interest rates or what not. So these 2 top companies implicitly sense purport to represent the exposure to the economy that the bottom 250 companies do, that was interesting. And also, the border point in the S&P 500 rankings of $200 billion in market cap is just around stock number 30, which is salesforce.com. We got a $200 billion market cap. And below that, they get lower. So what's represented $200 billion is a big number. How do you match how big it is? Well, you could go to the median, the middle company S&P 500, which is the 250th, and that's got a $25 billion market cap. It's an 8 basis point position. So anyway, that's -- I just -- I'm repeating what you said, but just from a slightly different angle. The other thing I'll say, since you've got to start on the questions. Yes, it's a record number of questions. And just fractionally under 50% of all the questions seem to have to do with cryptocurrency. That's it. So I have to say.

Okay. Well, thank you, Steve. And Thérèse, if you would be kind enough to see the questions. I'll try to add best to answer everything.

Sure. Yes. Steve's right. About half of them are on crypto. I'm going to try to group some of them together but -- so given that some of them are duplicated somewhat. So the first one would be, would you share your current thoughts regarding the cryptocurrency mining business and its future? Which maybe I should also read the next one. There's been much talk of cryptocurrency blockchain and specifically the belief that blockchain technology will be utilized on all exchanges, commodities, real estate, oil, gas, mining, farming, precious metals, et cetera, any thoughts on creating a business to provide these blockchain services? I know Universal is working with a large sugar refinery and others. I would suggest Barrick or South African miners are making an effort purely to provide -- prove their gold is not coming from irresponsible unethical mining practices. This could be utilized in timber as well, perhaps just investing venture capital in existing companies that provide these services would be of interest. So that would be -- what are your thoughts on the cryptocurrency mining, I'm not sure they actually put together, but I'll let you go.

Okay. Well, I'll do both. So let's do mining first. So it's important to understand that at the moment, the mining business is incredibly robust, is a very, very high return on capital. That's not going to last. No matter what the price of Bitcoin does, goes up or down. Here's why it's not going to last because there's something called a having, and the having will occur in about 1,200 days. What is they having? The having is that every 4 years, the compensation you get from mining Bitcoin and I should say, parenthetically, that when we say mining Bitcoin, that's the term everyone uses, what they really should say, it's a less elegant term, but it's the truth. You're validating transactions. That's why you get the reward. Anyway, in about 1,200 days, the rewards going to be cut in half. So if Bitcoin was the exact same price, your revenue is going down by 50%, but your costs are going to be basically the same. There may be some efficiencies that people figure out. We, over the years, as we figure out ways to make the miner is much more energy efficient. We're getting to the point where the laws of physics we're running into them. And I don't know how much more efficient they can be made, although I would imagine there's probably improvements. The only way the profitability is going to remain what it is. I don't think it will remain what it is, is the price of Bitcoin is got to be a lot higher. And that could happen. In the paper I wrote, I lay out, and I'll try to go into a little bit, the economics of it, that basically, when there are more people mining, the -- your share of block reward even before having is less and less and less. So what happens is, as a miner, you have a choice. You can put money into the machines or you could put money, if you want, because project mining is a pretty big one. You can create Bitcoin. So you can buy Bitcoin. So if the mining gets as possible, it doesn't make sense to put money in the machines, you start buying Bitcoin. If you don't replace the machines, the number of players is reduced. And your machines, at least the ones that are operating, get a higher market share, profitably goes up. And that's one part of the cyclicality of mining. And it's just part of the business. You have to live with it. But unlike a normal cyclical business, it never really goes negative. Why it's not going negative? Because it went negative, you couldn't have a blockchain. The blockchain exists, not because of some technology, it's because there are multitudes of machines that are simultaneously validating the transactions. And that's why it can be trusted. If it becomes centralized, it can all over be trusted, you don't really have a cryptocurrency market the way you had before. So anyway, so I write about this. I won't go into it too much because I've written a bad . But basically, the least efficient people set a floor on Bitcoin mining. They got to be -- you got to get a rate of return to them. If they don't get a rate of return, they're not going to do it. The most efficient people just get a higher rate of return. It's the exact opposite when you have no own business with the most efficient person happens to be the leader and sets the rate of return officially robust. They make a lot of money, but nobody else can be as efficient, enforce the matter of the market. It doesn't happen in the world of cryptocurrency. So I know this is very abbreviated. I hope that is adequate for thoughts about the mining. And now with the part 2 of the question, Thérèse, just to repeat it so everyone doesn't lose track of what it was, just to generate the thrust of it.

I think it was about how the cryptocurrency blockchain could be utilized on exchanges for commodities, real estate, oil, gas, mining, et cetera, even so to prove that, let's say, your gold is not from irresponsible or unethical mining practices and also perhaps with timber.

Right. Was this going to be -- the reason that there are literally thousands of cryptocurrencies is because there are literally thousands of possible use cases for cryptocurrencies. And therefore, there's going to be thousands, many thousands, I personally believe, it's in the tens, maybe even hundreds of thousands of blockchains that every SKU that can be made, ultimately is going to have its own blockchain. So every stock exchange, every type of stock, hopefully, it's going to have its own blockchain voting systems, searches, on search engines, they have their own blockchain, why they need a blockchain? Because the data of your searches, just exact whatever you're searching for is actually very valuable to advertisers, but you don't control that at the moment. The law is, whoever collects the data, controls it, and therefore, gets the revenue from it. And ultimately, what's going to happen is you will control it because your data is going to be in the blockchain, you will decide, when through lease it and to whom to release it and what advertising willing to accept. And therefore, the compensation for advertising is going to go to the people who buy instead of the people who collect the data, it's a revolution. And that's why I point out this issue of technology in the S&P 500. It's simply assumed that a handful of companies will continue to collect the data and ever more data, systemically organized and collect ever higher fees on it because the amount of data is ever accumulating. And I don't think that's going to happen. The blockchain revolution is going to store the data to the people to whom it actually belongs. The problem from an indexation point of view, we don't go back to that is that indexation theoretically is a holistic solution to the investment problem. You basically have everything. So what does it matter if Walmart is better than Amazon or Amazon is better than Walmart. You have it all. Except that now the companies will be competing with blockchains. They're not companies. They're just blockchains. They are open-source code that belongs to the world. So you'll be as an enterprise competing with something that is not a corporation, it doesn't have a profit objective. And you could easily get displaced, but you can't put the blockchains in the index. And therefore, the index is not the holistic solution. That's what I believe is ultimately going to happen, and we'll see how long that takes. Anyway, I hope that answers the question.

Yes. Then I have at least 3 that are about valuation. So I'll just read them in order. Note 4 talks about "other investments". Can you provide any insight into how to value the return on equity in those investments in cryptocurrency mining entities at the present time? And what are the near-term future business plans for the mining entities? Is creating other new cryptocurrency mining entities in active consideration?

Well, yes. I would like to, at some point, do something in the public domain, if it were possible in cryptocurrency mining. I would like to combine it, however, with other types of businesses. Maybe the building and repairing machines, maybe create a pool. There are a lot of possibilities. So we've only just begun. The reason is because nobody, and I mean nobody, has tremendous experience in this business. We ourselves have 5-plus years of experience in the world of business, not a lot of experience, especially in a business that's constantly changing because we'd like to do something in the public domain. We'd like to be in a position to raise more capital at some point for some type of enterprise that's mining plus some other things in the world of mining that we've developed an expertise in. But that's as far as it goes. So I can't tell you about anything. I don't have anything to share right now, not that I'm keeping anything for you. It's just things that we're considering but we haven't really done much. So that's where you stand in that subject.

Okay. So another about valuation, how would Mr. Stahl calculate the intrinsic or fair value price of FRMO? I find it challenging. For example, the book value of its ownership in digital currency group is $76,261 and the book value of cryptocurrency mining entities in November is listed as $246,824. So I guess it's just kind of how a method for finding fair value.

Okay. Well, there's a couple of publicly traded companies that are involved in cryptocurrency mining. So I can tell you that they basically value their equipment, at least at the moment. Depending on the company, it's something like 3 or 4x the cost of the equipment. I personally think that's bizarre, but anyway, but that's the way the market values it at the moment. So you can use that, if you will. I don't think I'm going to be using that, but I don't know how much help it this year, but that's how the market actually values it. With regard to digital currency group, there's some things you can know about. So you know it's got $20-odd billion of assets under management. It's in cryptocurrency is a generalization of charges of 2% management fee, you compare the revenues it obviously doesn't cost anything close to that number, the custody of the assets. It's not actively managed. You'll have portfolio managers and such. There is a cryptocurrency they say exchange, it's really a brokerage all need things that a cryptocurrency state of exchanges are really brokerage businesses, but they use the terminology exchange. Anyway, you'll have a pretty good idea how to value that in the metrics because coin base is coming public in not too distant future. And you'll be able to use that as a metric. Coming back to the asset management side, it's also a venture capital side. And there, it's what is the venture capital investment worth if they were to become public when they -- you'll get a better idea in the upcoming months because things are coming public. So for example, VPC Impact Acquisition, which is a spec is going to come back. Back to you will recall, is the cryptocurrency custody/processing business of the Intercontinental exchange, and you can get a sense for what the book value -- price-to-book value ratio is going to be. It's going to be very, very high. So chance are any viable business in cryptocurrency is going to trade at many multiple -- many times, it's book value, at least in the current environment. Coming back to the asset management business, so the complexity of it, and I don't want to tell you exactly what the number is because there's an element of subjectivity in it. The question is what multiple -- what relation of market value to AUM does one apply, if the assets are in a trust? So it's not like conventional asset management, where the assets come and the assets go. In the case of the trust, it's essentially permanent capital. So therefore, the revenue horizon is really far out, even if the assets don't decline in value. And you can forecast for much longer. Another way of saying discount rate you would apply would be a very low discount rate because of the stability of the assets, although not their market value. You might want to raise discount rate because the market value is so volatile. But I think over time, the market value is going up. Anyway, you'd apply a certain market value to AUM to it, it would be a very -- by investment management standards to be very high. And that's the way you would value it. At least that's the way I do it. But as far as number goes, there's this element of subjectivity, and we all have to use our own number and our own discount rate. And it's a question of what you think the risk is. So it's as far as I can go with that question. I hope it actually answer.

So similar would be the following: Please explain the real value of each of the following investments which showed declines or no change because of being carried at cost, but probably are worth substantially more. And list is Horizon Kinetics, Cryptocurrency Mining, LLC, 1 and 2, Horatio Mining, which was sold to Winland in exchange for Winland shares. There was a question later on in the Winland section about that. HK Tech, and Digital Currency Group. So those are all mining question of that.

Okay. Well, digital currency is not a mining business. I mean, there -- I think there's a little bit of mining business in digital currency, but it's surrounding area, really. It's not significant. Anyway, with mining businesses, if you just wanted a multiple and look at something, there are plenty of publicly traded companies, and we have a big interest in one that's Winland. It trades a certain multiple of book value. Winland also owns cryptocurrency assets, it owns mining equipment, it owns a sensor business. So you have to take that into account. But at least as far as the stock market is concerned, the market uses a price-to-book ratio, the price-to-book ratio is actually fairly high. It's not uncommon to see 4x book value. And maintaining 4x book value is a preposterous number. Well, if you do, you really have to rethink that and because the S&P, believe it or not, trades at 4x book value. So you could say that if you bleed the cryptocurrency business is going to grow faster than the S&P and some would think it would. Maybe the cryptocurrency business is entitled to a higher price-to-book ratio in the S&P 500. Or alternatively, you could say, the price-to-book multiple of the S&P 500 is way too high, and you could solve the problem that way. So I think that's the way it is. Anyway, we sold a ratio to Winland and we sold it for stock in Winland. When we did that transaction, give or take a few pennies, we sold ratio mining at book value, and we got shares in Winland. It was kind of book value. I don't want to say it was exactly book value, but it was very, very close to book value. And that was at the beginning of the summer of 2020. So it shows you how fast the market changes its point of view. But in the early summer of 2020, the market was not a name [indiscernible] crypto. It has its moods, and that was the mood then. This is the mood now. It's ever-changing. So I don't think anybody can find a fixed guidepost so there is a standard valuation. So I hope that's adequate. I know you'd like to fix guidepost. But unfortunately, in the world of crypto, there is no fixed guidepost.

Okay. Mention was made in the October 14, 2020 earnings call of plans to build cryptocurrency mining machines. I know you talked about this in your remarks. Is this still an ongoing endeavor? If so what progress has been made and has more money been than invested in the enterprise in this quarter. Is FRMO's interest in this activity as part of an ownership in a separate corporate entity or as a business entirely within FRMO? That's it.

Okay. So to begin with, we own a piece of a business called HashMaster with HashMaster that did the work. But the machines that are owned by HashMaster, just we acted as if we were a client, and we just wanted as an experiment to build some machines. So we basically acquired some parts and the objective was to see -- we're buying a collection of parts and want to see how many machines we could make from that collection of parts. And they were run successfully. Meaning they would run at or about the stated hash rates. And we ended up creating 15 of them. The total investment, I'm going to be off by a little bit, we didn't risk a lot of money. As I recall, maybe $100 or anyway, we invested something like $2,700. And maybe it was really $2,800, I don't remember, but I seem to remember $2,700. So forgive me for being a little bit inaccurate, but we ended up getting 15 machines out of the parts, so 15 machines it was $2,800, it was $186 a machine. So that's pretty darn good. Trouble is that if you want to do it at this very moment, it will cost a lot more as the parts are expensive. We're using the parts to repair other people's machines. So we just make more money doing it that way. But all you need is a few days, maybe a week of negative cryptocurrency returns. And believe me, you'll buy all the parts you need. And you'll make machines. We would like to eventually make a big inventory machines. If we make a big enough inventory, if we could actually pull it off, we did it as an experiment. If -- the experiment was, it was successful beyond my wildest imagination. I thought it would be a lot worse than that, but it was successful. And the first opportunity, we're going to repeat it. And if we can do enough of them, we're going to create a subsidiary. Hopefully, recall something like FRMO machines, and we'll do something with it. It will be a real business. At the moment, just had to be disciplined, you can't risk a lot of money when the parts are expensive. It's just -- but there's no question, they can get cheaper because I alluded to earlier, we're -- every day, we get closer and closer to having, and those parts are going to be worthless. And eventually, you have a situation [Audio Gap] don't find it valuable to repair their machines but because the labor is too expensive. We're already paying for the labor. There's no marginal cost for labor. That gives us an advantage. We just pick our moment. So as in generalization, when the market is robust, we'll fix other people's machines. When the market is not robust, and there'll be periods of time when the market is not robust, we'll build our own machines. And that's the way it's going to go.

Some upside potential noted previously was Bitcoin could be equivalent to the gold supply or even the U.S. dollar, with the downside that it could go to 0, with Bitcoin developing along the lines that Murray has outlined, had outlined. An institutional investor acceptance evolving, how has the upside to downside ratio changed?

Okay. Well, to begin with the upside. You could argue, well, let's -- I don't argue that Bitcoin is going to be worth the value of the gold supply. Then the reason for that is, what is the gold supply? Are you saying the amount of bullion that's available? Or is it all the gold that's ever been mined? Does one include the jewelry? Does one include the gold that's artwork, the museums and so forth? Does one include the gold in the central banks. So it's very hard, yet you have to come up with a number. And it's very hard to choose number. A better number would be M2. The trouble with it is you can't just use the M2, the money supply of the United States dollar. You have to use the M2 of the planet. Because that's really the M2. So if you look at the M2 of the plant, it's a very big number. But is it adequate? Because not all the Bitcoin is in circulation, basically M2 measures, the amount of money it's considered to be in circulation, but they have something called M3, which considers large time deposits. So the question -- it's a theoretical question. You could debate the answer. Does one add in big holdings of Bitcoin that's on the blockchain, we can see it, that basically never trades. So should we be using M3? Or should we reduce the amount that Bitcoin outstanding by the amount of these big deposits you never trade? And how about bitrot, which is the number of people who have lost their private key and the Bitcoin actually exists, but it's not accessible. So what is the amount of Bitcoin? And then they're going to be other successful cryptocurrencies. They may not be used as a form of money in the conventional sensitive word, but they may be used as something else. And then the last complexifying point is government bonds using United Treasury for a moment, or we all know how much is outstanding. As treasury is a very big number and British Gilts and [ Ghanian ] bonds, whatever, that they are a form of money in the sense that they can always be hypothecated. You always get money out of it. So you can take $1 million in treasuries, and you can borrow a lot of money against it, especially if you want to buy more treasuries. If you're buying treasuries, you might be able to leverage them 10x. So it's not clear how big numbers is, except it's a very, very, very big number. So if you were taking all the M2 of the world, and all the government bonds in the world, is that were your target? And it's constantly -- it's increasing every hour and every day. I would say the number would be something like $300 trillion. The Bitcoin was 2/3 of that market. Bitcoin -- and remember, the number has constantly grown. Bitcoin would be a $200 trillion mark cap, except that we'd be bigger in net because you have to allow for bitrot and the stuff it's size and circulating. By ignoring that, it would be a $200 trillion market cap in relation to maybe a $597 million, $600 million market cap -- $600 billion market cap. And by the time it got to $200 trillion, which is a big increase in value, that number is going to increase a lot because the nations of the world, keep increasing the amount of money in circulation and keep increasing the amount of bonds that they're issuing. The upside is, it's really tremendous. And I believe it's going to get there. And then you can even say, it shouldn't be parity. It should be a premium debt. How much of a premium you can debate? Why should it be a premium because the inflation rate in all the field assets is x and the inflation rate in Bitcoin is a fraction of that, and it's going lower every 10 minutes. It goes lower by around the year, but it goes lower every 10 minutes. And you know exactly what it's going to be. There's no uncertainty. You could even argue for a premium, a big premium. There is a -- return is quite -- the return potential is quite extraordinary. If you're using $300 trillion, as I alluded to before, let's just do that just to see what it would be. So $300 trillion. Remember, it's a moving target. It goes up every day. And let's say, the current market capitalization of $597 billion. The co-efficient expansion would be 502x a year. It's 502x your money, except there's much more because that number of $300 trillion is constantly growing. So it's the highest return thing you can possibly, at least that I can possibly see. And then that's not the end of it. Because if it turns out, the assertion made earlier is correct that the various blockchains are going to maybe not intentionally, but ultimately, compete with the technology companies. They're not just investments, they're disruptors. They can disrupt the entire S&P 500 in ways that are just quite inconceivable right now. So people have to buy them just as hedges, even they didn't really believe in them. So a lot is possible, a lot. I believe it's going to happen. So I hope that's adequate.

So here is a question. I'm sorry. Here's one with -- probably has a short answer. What did the Horatio assets consist of that were sold to Winland?

There were some mining machines. There were some Bitcoin and some other currencies like litecoin that we had mined, they were, in effect, litecoins, there was a little cash in there. Not a lot, there was some cash in there. That's what we sold. We did the traded book value. We did traded book value with Winland, in a way, you could say it was an experiment. We did the trade it at book value. We traded book value with Winland, in a way, you could say it was an experiment. Once we did it, then we did the prior mining transaction. The idea is once we turn Winland into at least in large measure, a mining company, is we value the book and what was the market in value add? The market value has a big multiple of buckets. I think it's about 4x book now. That's what ended up happening.

Thanks. All right. And on December 11, Bitcoin was $18,000, and you were heard to say you expected it to become worth 2,000 or 4,000 times more. You did not say when. By the way, you made an interesting point in saying it is not going up, rather the dollar is falling. So I guess that's just more of a statement. Bitcoin then proceeded to go on a rapid tear to $40,000 in less than a month reached on December 8. And no coincidence, I imagine FRMO, which was $9.49 on December 8, ran to a close of $14.35 on January 14. Here we are, December unlucky, January '21, and Bitcoin has dropped to about $31,000 as I write this question this morning and FRMO to $10 and 11 shares -- $10 a share, 2 big drops from their heights, though a lot up from a month ago. What do you attribute all this commotion? In other words, volatility in each, if you have any idea?

Well, yes, let's begin with there's some obvious things and not obvious things. The obvious thing is when you get a move of that magnitude, there are always going to be people who were going to take the position that, well, even though Murray Stahl or whoever they're referring to things is going to be much higher, it might not be much higher in the next couple of months. So I take my profit now, either it's going to be lower and I'll buy back in or maybe it won't be lower, it will be the same price and I'll buy back in again. And there's nothing wrong with that. That's normal that -- people do that all time. So that's one reason. The second reason is the buying from the institutions is going to be gradual, not going to be a mad rush in. So the price gets to be, let's say, it's $40,000, the typical institution that was looking to invest in it is going to reduce its purchasing perhaps to 0 and see what happens. In other words, they're not going to put hundreds of millions of dollars at a time into an asset that's appreciating that rapidly. So you're going to lose, at least in the short run, a fair amount of buying support. And then holders are going to see that, and that will prompt them to sell. And then they'll get to a level, whatever that level happens to be, perhaps it will be $31,000 or perhaps it will be some other number, where institutions will gradually recommence their purchasing. Why am I confident the institution is going to recommence their purchasing? Because a very big part of their assets are conventional bonds. So what can we say about conventional bonds? It was an ETF. The aggregate bond ETF, which is the biggest bond ETF there is, and I just was looking at it today, so I remember the numbers. The yield to maturity of the aggregate bond ETF, which is basically the bond market, it's 1.09%. That's the rate of return. And that's the rate of return you get if rates don't go up. If rates do go up and will go up by 3 basis points or will go up by 300 basis points or some other number, I don't have the slightest idea. But if it did, whatever number you want to use as an input, given the Québec app portfolio, is going to make it a lower return. So your best case return is 1.09% every year forever unless rates go up. And if they go up, depending on how much you go up, you can get -- you will get a lower return. Now since we all can agree, whatever outlook for inflation is, that's lowered the inflation rate. That money is being debased. Now maybe some people believe the inflation rate is going to be 2 or some number like 2, then it's only getting debased by 1% a year. Maybe some people believe like I do, the inflation rate is higher and is going to go higher. Well, then you can take that as your forecast. Well, in the event, that's an unsustainable situation. So the portfolio, those bond portfolios, which number in the tens of trillions dollars. The entire size of the bond market in the United States of America is $82 trillion by assets. The American bond market, $82 trillion and growing. So you have to do something to protect it. Now a 1% position as an offset in crypto, let's just say it was Bitcoin, a 1% position. And by the way, that number, $82 trillion, is growing everyday by many billions of dollars. In any event, 1% of $82 trillion is $820 billion. That's considerably more than hallmark capitalization at Bitcoin, taking it as if it were liquid security. So you can see a 1% position, meaning theoretically, the collective bond market, say, you know what, I'm going to take my this year's bond coupon of 1% and invest it in Bitcoin to create a hedge against the debasements of the currency. And you wouldn't be able to buy all the Bitcoin anyway, just not doable. And who is to say the appropriate hedge is 1%? What if it were 2%? And I'm just including America. You have to include all the other countries of the world. America, in economic terms, is something like 16% of the world. So assume -- take that number from America, multiplied by roughly 6, take 1% of that number, you can see the potential buying, assuming every Bitcoin is available for sale, which it clearly isn't, and you get the idea. And what if the number is really 2% or even 3%? And we only talked about institutions. We didn't talk about individuals. We didn’t talk about real estate. What about triple net lease real estate, which, in theory, is a hard asset, but reality is structured like a bond portfolio. [ In July ] triple net real estate rent. Anyway, you see what I'm driving at.

Yes. Okay. Then further, same questioner. I've heard it said that 65% of Bitcoin wallets have not had any coins enter a lead for years. What do you know about this? And what do you know about the amount of Bitcoins involved in 65% of how many wallets do these amount to? For example, there are how many in total and how many new ones open each day or month or whatever period you watch?

Well, there’s a website called Blockchain.info. And rather than do it from memory, if you go on the website Blockchain.info, they have precise statistics on how many transactions there are, how many wallets there are, what the average amount of money in them. There's all sorts of statistics there. So all that you can get all of that there. But a lot of people, it's true, open a wallet, and they just want to experiment with it. They'll put a Satoshi in there, which is a tiny fraction of a Bitcoin. I don't think it's true that there's no money in there. I think people open them as experiments and there's some de minimis amount of money there. Now you might say what's the difference? Well, people experimented with it and that a lot of people find it just too cumbersome to -- which is true for the average person. It just isn't an easy way of conveying Bitcoin, either buy or sell, on their own. It's not for everyone. That's going to change in next year, but at the moment, that's where we are. So people try it. It becomes, I guess, frequently beyond their capacities or perhaps they don't want to challenge their capacities or test their capacities, but that's true. I don't remember the exact number, but you can get the exact figure off Blockchain.info.

Okay. Incidentally, new Bitcoins price daily are dwindling in number and are now, what, 900? So the supply of Bitcoins versus increasing demand must be getting more and more out of balance. And hence, is it correct to say that the very recent increase in Bitcoin price is understandable, but the most recent price thus must be something likely to be very short-lived? That's the question.

Well, like I said before, as I said before, the current market capitalization of all the Bitcoin is something like $597 billion or thereabouts. And in relation to the bond market, it doesn't even rise to a rounding error. So basically, you've got $82 billion of assets in the United States -- forgive me, $82 billion, $82 trillion of assets in the United States, $82 trillion versus $597 billion, $82 trillion, not even a rounding error. So to be equal to 1%, let's say 1%, we regard that is not around the error or some people would say, out of $82 trillion, 1% is still a rounding error, you got to appreciate a lot just to get to 1%. We're nowhere there, not even close to there. And as I said, most of the Bitcoin is not even available for sale. So we're not even in the first inning of this experience. The various nations of the world, they have no alternative. They are riddled with debt. They can't stop issuing debt. If they stopped issuing debt, the world economy come to a screeching halt within days. It can't stop. There are too many jobs, too many livelihoods, too many enterprises that are -- depend upon the continual increase of debt. So these pieces of paper and other hard assets that people consider to be wealth. There's only so much wealth in the society. You just can't keep issuing these pieces of paper without debasing them. That's the whole idea behind Bitcoin. That’s the -- read the original book, “Denationalization of Money” by Friedrich Hayek written in 1977. It's basically what it's all about. And the inflationary world, at least in terms of debt issuance, that he observed in 1977, it's literally nothing in comparison to what's happening right this second. It's literally nothing. It's irrelevant. So at some point, people lose confidence. Are we there yet? I don't have the slightest idea. I can just tell you this. The bond market, the last 6 months, at least in America has had a slightly and slightly negative rate, a modestly negative rate of return, modestly negative. Make of it what you will. It's -- people look at historical rates of return in the various bond indexes, and they don't understand that the -- it's not an interest rate, not you're putting money into the United States Treasury and they pay you a certain rate of interest. The return is not a rate of interest. It's historical appreciation because rates go down, bonds appreciate. It's an inverse relationship. At the moment, there's no room for rates going down. So people don't see it yet, but before very long, I believe they will see it. And it'd be interesting to see how people react. I don't suspect they're going to be very pleased, the rate of return. Once they understand, as they ultimately will, that bonds can decline in value, and they do decline in value. Haven't experienced that really since 1980. This is 2021, 40 years. Somebody could have been 20 years old in 1980 and now they're 60, never experienced a bear market in bonds. They don't realize that there even can be, and there will be. So I think it's going to happen. And then human behavior will change. It may happen very soon, may already started to have happened. We'll see how it goes. Okay. What else can we answer? Thérèse, hello?

Sorry, I was on mute. Okay. Here's the next question. How can the SEC ever allow Bitcoin ETF given their limited supply and perhaps there’s hoarders plus BitRock leaving so little which ETFs can possibly purchase? How will the SEC say okay to creation of ETFs, given the supply situation, in your opinion?

Well, I personally think it's inevitable. The CFTC has already said okay to cash delivery, Bitcoin futures, has already said okay to physical delivery futures. The SEC incidentally has said okay to Russell 2000 ETF, to take the bottom 300 or 400 names at Russell 2000. Look at that liquidity, and it's not very good. And there is even a micro-cap index in the United States in companies that have virtually no liquidity. The issue is not liquidity. The issue is transparency. So right now, there are transactions going on and all the things the SEC would like to guard against, like spoofing or things of that type. They're not happening on registered regulated exchanges. So it's not highly clear that the price you're seeing is the real price. So the first order of business if you want to create Bitcoin ETFs has to be to have regulated registered well-ordered exchanges with trading rules. And that's coming, going to happen. And if it doesn't happen in America, I believe it will, it's going to happen somewhere else. It's going to happen in Switzerland. It's going to happen somewhere. A matter of fact, it's on the verge of happening in Switzerland, and it's going to happen in other countries as well. It’s just a matter of time. And the exchanges, there's a lot of software and systems and thought and rulemaking has to go into doing this thing, and it takes some period of time, but a lot of the work is done and it's going to happen. But basically, if it's the policy, I don't mean to be [ anti-fiscal ], the policy of every government to debase currencies. Maybe they can't do any different. Well, people are going to look for a solution. No one is going to tolerate taking debased money as a payment once they come to a conclusion, if they're really being debased. It's no accident that the Bitcoin surge, which you could say started in the summer of --maybe it was late summer of 2020. That corresponds precisely with the inception of a modestly negative, and it's only modestly negative, mildly negative bond market rate of return. Just a matter of time to until it accelerates, just a matter of time. Maybe weeks, maybe even days on the suspected days, but it's possible, really possible. Remember, when you look at Bitcoin, what you have to do, at least intellectually, take the chart, turn it upside down. You're not looking at an asset that's appreciating. You're looking at a dollar that's depreciating. So the question is how May Bitcoin can a dollar buy, and to keep buying less and less and less of them, meaning if you want a Bitcoin holder part with a Bitcoin, they want more of your dollars to encourage them to part with. So the majority of people think the Bitcoin people are rational, the bitcoin people and cryptocurrency people in general think the Fiat buyers are rational because their money is being debased. They're willing to invest their money in a bond that clearly provides a negative rate of return. And there are bonds that actually have negative interest rates in the world, quite a few of them. So which -- so who's crazier? That's the issue.

Okay. Okay. How are the cryptocurrency coins valued on the balance sheet? And what are the mining economics as of trading as today for FRMO and Winland? I remember you already talked about this some more.

Okay. So how are they valued? They're valued at market on the data we value them. I'm going to take this opportunity. There is some numbers I normally read in the beginning, give you what we own at these various cryptocurrencies. So I'm going to read these things right now, just the cryptocurrency, then we’re bound to get a question about energy. And I'll read to you the TPL numbers anyway. We own 561,141 proportionately, mostly through via the private investment funds of GBTC Bitcoin Investment Trust. We own 92 shares or 92 coins of Bitcoin cash, just as to the funds. We own 1,565 shares of the Ethereum Classic Investment Trust. We own 23,636 shares of the Bitcoin Cash Investment Trust, which is restricted at the moment, but soon will not be. We own 1,374 shares of the same Bitcoin Investment Trust, which is not restricted. We own 454 shares of XRP, otherwise known as Ripple Investment Trust, which is that fund is actually closing, which is an interesting story, if we could get a question on that. We own 4,281 shares of Light Coin Investment Trust. Just to mention parenthetically, you won't believe this, but I tell you it's true, although you'll think I’m making it up. Light Coin Investment Trust, at least as of yesterday, traded -- obviously restricted because we can’t trade, so we valued it at NAV, but it traded at not a 20% premium, 20x in net asset value, 20x, if you can believe that. You'll think I'm making it up, but I'm really not. We own 549 shares of the Zcash Investment Trust. And we own 210 shares of -- 210 coins of Bitcoin Gold through the partnerships Queens held directly. All these, we basically -- all these we mine, with the exception of we own directly [indiscernible] partnerships, 7,644 shares of Bitcoin Investment Trust, GBTC. And as far as Queens go, these are all things that we mined, round it to the nearest whole number. We own 78 Bitcoin. We own 628 Light Coin. We own 35 Ethereum. We own 662 Ethereum Classic. And we own 54 Zcash, all mined. And Winland owns 10.15 Bitcoin, all mined, and also owns an investment in the [indiscernible] bankruptcy claims, which are ultimately payable in Bitcoin. We own roughly 28% of Winland. So that's the Bitcoin figures. Now I want to repeat your questions so everybody will know what the question was because I read a lot of figures in there, and everyone's going to forget it. So just if you wouldn't mind repeating it Thérèse.

Sure. Sure. How were the cryptocurrency coins valued on the balance sheet? And what are the mining economics as of today for FRMO and Winland?

Okay. So as I said, the coins are valued whatever the market value is of that day. So that's the protocol. And as far as the mining economics, they're very, very robust. So maybe the best way to express it is relative to expenses, the revenue -- but maybe with the recent decline it won't be as good, but the revenue was something like 3x the expenses. In terms of profit margin, you have something like multi-hundred percent profit margin, which is unheard of. And as I said earlier, it’s just not sustainable. Not because it's a high profit margin or that's part of it, it's not sustainable because, ultimately, you're going to get to a halving and the economics are going to change for the worse. But if there are less people mining, the economics change for the better or if there are less people mining, to give them incentive, if people don't want to go into mining and they buy coins, the mere possibility of people taking their cash flow and buying coins as opposed to machines that will serve to drive the price up. That's the mechanism. And that's why there's certain amount of cyclicality. I don't expect the very robust margins to last.

Okay. Would you shed some light on the changing nature of the other investments? In other words, the mining LLCs? Their value appears to be reducing. However, when there’s a seemingly correlated increase in the crypto mining assets line in noncurrent assets, are the other investments being moved to fully owned FRMO assets?

No. What's happening is when you buy machines, it’s appreciating constantly. So we used to use a 3-year depreciation rate. Now we use a 2-year depreciation rate. Now one of the interesting things about that is, so we have a number of miners. These are S9 miners. They're all fully depreciated. So theoretically, they have no value. And believe it or not, at the moment, we're using them and we're actually earning a profit on them. So if the Bitcoin price is high enough and you can buy electricity low enough, you can actually use them. So we're just appreciating the stuff fairly rapidly because we think it's to your life. Now maybe that's a little too aggressive, but it's the best estimate we can come up with right now. I mean, nobody knows. If it were a tractor, people have a pretty good idea of how quickly it gets depreciated. No one really knows and you just do the best you can. We're trying to do the best we can. So that -- I hope that explains the change in the basis on the balance sheet.

Okay. Based on what metrics and qualities do you think the market should and eventually will value a publicly traded crypto miner?

Well, eventually, the mining returns are going to stabilize. Right now, there are a lot of people who -- they just won't accept cryptocurrency. And they're wedded, and for quite unsimilar reasons, they are weighted to the value of Fiat. And why shouldn't they be? I totally understand. So let's take U.S. bond market as an example. It's 40 years, 40, of an incredibly robust rate of return. So why shouldn't people think of that as the creation of wealth? In many of those years, I don't think all of them, but many of those years, the rate of return now, of course, it comes from the reduction in interest rates, but many of those years, the rate of return is basically a function of declining rates. So -- and it certainly is a lot bigger than whatever you might say is the inflation rate. So why shouldn't they think of it as well? It's entirely logical. There's a minority of people who think as I do, that it is completely unsustainable. But inertia, history, practice, custom, call it what you will, 99% of people are still there. Me, they are pieces of paper that are being debased. Many [ absent ] people do not feel that way, and I can totally understand why they don't feel that way. And -- but ultimately, I believe they're going to change their minds. I believe, ultimately, the biggest asset class by far is going to be cryptocurrency. And it will dwarf the bond market. There may not even be a bond market as we currently know it. And I believe it's ultimately going to dwarf the stock market as well. So it's a revolution that's happening. It's a revolution in the way people deal with money. So if you want a little history of it, I'll only have time for a couple of minutes because I want to answer all the questions, but I believe that civilization itself, in the 14th Century, [indiscernible] took a turn for the worse when we accidently invented fractional reserve banking. So what’s fractional reserve banking? Well, there wasn't money at the time in the way we had [indiscernible]. There was gold and silver and things like that. So most people didn't want to keep it at home that had wealth because how can you defend it? So you bring it to a bank that would store it for you. And originally, they would charge a fee for that storage because they had the security. They had the armaments. They could do it. And they began to realize that in a typical day, most people won't come for their gold. They only need to retain a fraction of the gold that's there for redemption purposes. The rest, you can lend added interest. And so began fractional reserve banking and then began -- it doesn't take a great leap of imagination to see that if a government borrows the money and the government decides how many grains of gold go into a coin, the government can actually pay in debased coinage, and that started the story. Ultimately, it was just a matter of time until we went from gold to paper. The world resisted for a very long time because the world understood what was going to happen. The Chinese minted paper money about the time of Marco Polo, I believe. They were the first. They certainly weren't last. The United States had bank notes. They didn't really have federally issued currency until the war. But how else are you going to finance the war without issuing money? How else could they fight the revolutionary war without issuing bonds, called Continentals? Ultimately, they became depreciated to the point where they were virtually worthless. And you can go into the history of every country on the planet, and it's happened to basically everybody, it's just a question of what rate of depreciation. Even the United States dollar, the only reason The United States dollar became the world’s reserve currency is not that the United States dollar didn't lose its purchasing power as well. Since the inception of the Federal Reserve Bank, the United States dollar has lost 99% of its value. As horrible as that is relative to sterling or the various European currencies or the Chinese currency, this is pre-communism, that's actually a pretty good experience. Every country did it. Every single country did it. There are no exceptions. It's just a question of degree. Now the bond issuance is without parallel, meaning it's greatest it's ever been. And people come to believe, even though it's greatest that it's ever been, so you’re doing it more, not less, they believe that it's immutable, that its purchasing power will remain. These are the 99%, the people who would choose to take these pieces of paper. I don't buy that. Now by the way, you need to diversify in stocks. If ultimately, if interest rates go up, all the high multiple stocks are going to come down in value anyway. It will be worse than owning a bond. It's all tied together. If you want to be diversified, you’ve got to do something else. But until that something else becomes reasonably well-accepted, it's going to be volatile. And you're going to live through these big declines and you’re going to live through these big advances. Some would be worse than others, but that's just the way it is. Until it becomes recognized by a large number of people instead of a small minority, maybe 1% of investors, if it's that high. So we're on the cusp of that happening. The returns of the last 5 years, we've gone from an insignificant fraction of 1% to, in my estimation, it's nothing, just an estimation, maybe 1% of professional investors have a place in their portfolio for Bitcoin, although it's not as much as ultimately I believe they're going to have. It just started. So what's going to happen? Just a matter of time. I don't think a long period of time.

Yes. Just in the interest of time, we are not quite halfway through the questions. So I don't know. Anyway, we'll just go on.

I say hard -- do we have a hard stop? Because I don't know how long this call was supposed to last. I mean…

No.

Okay. Well, I'll keep going. I mean, we don't want to make this a multi-hour call unless people want to make it a multi-hour call.

Let's just see how we can get through them. What the...

Okay. Well, let’s go -- how about this? Let's go until about 6:00 or something. And then, well, if you want, we can do a previous -- get another call. And because we don't want -- I don't know how many people can stay and listen. I want everyone to hear it. So why don’t we go until 6:00, and then if we get through half or whatever it is, we'll make a second call to get through everything else. And in the interim, people think of any other questions, they can add to the list, and let's set up another call, okay? So that we can get through everybody.

That's a great idea. Okay. So in that case, we have several more on crypto, and some of them are actually Winland. So I don't know if you want to finish up with that or go on to a few of the others?

Well, whatever you pick, whatever you think is appropriate because I do want to answer -- just I think…

Well, if we haven’t -- okay.

I think if we can be here until 8:00 at night. Yes.

Exactly. Yes.

Okay. Whatever you think is appropriate.

So why don’t we switch over? There is a question on TPL. I've reviewed every document on the FRMO website trying to get a history of the progression of the company. There was one quarterly report that stated the percentage of TPL held in each of the partnerships. I'm curious to know what the remainder is invested in. I believe South LaSalle was mentioned as holding 62 seats on the Minneapolis Grain Exchange. Wow, that was a while ago. So that's the question. I guess it's about TPL holdings and the partnerships.

All right. Okay. So let's just say -- let's do it this way, do TPL first and move to South LaSalle. So if you look through all the partnerships directly, so add all up and then you add in the shares of FRMO and its subsidiary, Fromex, owned directly, the number of shares we have as of December 31, 2020, is 54,022. So of that sum, about a little less than 7,000 is owned directly and the balance is owned in the various partnerships. So let’s deal with South LaSalle. South LaSalle owned shares of Minneapolis Grain Exchange and toward the end of 2020 in late December, the Minneapolis Grain Exchange merged with the Miami Options Exchange. So now we own shares of the Miami Options Exchange, otherwise -- sometimes known as MIH Holdings, but I'd like to call it MIAX. So I‘ll refer to it as MIAX. And we're now a fairly decent-sized owner, I don't know if we're the biggest owner of MIAX, but we're a substantial shareholder of MIAX. And MIAX was an options exchange, so just compare. And by the way, we had sold the remaining stock exchange we owned directly. We had sold that to MIAX as well the prior year. So just the rationale for MIAX, we owned a little bit of MIAX. MIAX developed completely new technology to do options trading and spent a lot of money doing it. In my humble opinion, I am biased, you shouldn't take my word for it, but in my humble opinion, it's the best technology there is in the world of exchanges, and it's constantly improving. However, for the bulk of our investments, we took another approach. We bought Minneapolis and Bermuda. Logic there was they had unique licenses. In case of Minneapolis, they had a clearinghouse. There were 3 clearing houses in America, Minneapolis owned 1 and the CFTC, Commodity Futures Trading Commission, was not going to license anymore. And if you want to do things in futures and derivatives, you basically have to have a futures license, namely a clearinghouse. And put that futures license -- put Minneapolis, in other words, together with MIAX, and you have something truly powerful and great. And I think you can see it. You can -- if you just follow MIAX, you can see what's happening to the volume. The term everyone else uses is the volume is lighting up. For some reason, I never use that term, but that's the term everyone else uses. It's actually pretty accurate. So it's really growing at a very rapid rate, and the merger just closed in late December. And it was growing at a fairly robust rate even before that. Bermuda is the same thing. Bermuda is a national asset. The Bermuda Stock Exchange is a national asset. Merged it with Minneapolis -- with MIAX and bring the technology there. Bermuda was too small an exchange to really afford its own technology. And there are all sorts of intriguing things that can be done in Bermuda because it's its own jurisdiction. It's a country, in other words. And it has the advantage of a time zone being 1 hour ahead of America. You can do all sorts of very intriguing things there, and that's about to bear a lot of fruit in my opinion. So that's what's there. So the MIAX story is very, very exciting. That's what's in South LaSalle. Like, I wouldn't mind if I can get the money, buying more MIAX. It's a truly wonderful exchange. It's not public, of course, so it's a private investment, but I just can't say enough good things about it. I'm delighted with that investment.

Great. One -- well, this may be a quick answer, too. It appears that 1 -- these are 2 questions on OneChicago. It appears that OneChicago exchange stopped trading in September 2020 and withdrew its registration to trade securities and futures in December 2020. Can you update shareholders on the status of OneChicago? Did it result in a net loss? Basically, both questions are about that.

It might, it might, it might well because it's winding down. So it's going to -- they're going to liquidate the assets. I don't know what we're going to get. It might. And it's a shame. I thought the idea was sound and the license was valuable. And it's just too bad. Those things happen. I would have liked to proceed with it. But I guess, if you look at the 3 -- we were small owners. We were kind of irrelevant to -- the big owners were CBOE and the CME. And I guess, from their point of view, they have much larger strategic considerations, so I consider -- I can see it from their point of view. My point of view, I would have liked to develop a futures business in single stock futures. It's the obvious alternative to short selling. But then again, short selling is so profitable. It's actually been a very controversial subject for a lot of people. So I guess exchanges want to go in another direction. That's the way it goes. I've got to accept it, but I would have loved to have continued. If I would have had the resources, I would have continued it by myself. I just don't have those kinds of -- we don't have, obviously in FRMO, those kinds of computer and technology resources. So I got to accept what I got to accept. It's too bad, but that's the way cookie crumbles, I guess.

Okay. There is one -- another question on MIAX. Can you give a brief update on the economic prospects of MIAX Group? I think you did. Following the formal acquisition of the MGEX in December, what is FRMO’s percent ownership of MIAX? I do have those numbers if you want them.

Yes. Okay. Yes, I do. If you have it, rather than just memory, why don't you tell us what the numbers are?

Okay. Directly, FRMO owns 653,394 shares or 0.84%. FRMO also has 25.7% of South LaSalle LP. And South LaSalle directly – these are a lot of numbers I'm throwing out, but you'll get the point in a minute here. South LaSalle directly owns 4,471,378 shares or 5.73%. So FRMO's implied ownership through South LaSalle, it makes our -- it is 1,149,712 shares. So we have a total direct and implied of 1,803,106 shares or 2.3%. That's it.

Okay. That makes us -- there are a lot of people who are invested in MIAX. And I think in the world of holders, we're up there in the world of holders. I don't know if we’re the biggest. At least I don't remember if we're the biggest, but we're big.

Yes. Okay. And next question was the same. So maybe we could switch over. I think this is a quick answer also. Someone had a question about the float. I might be wrong, but there appears to be a discrepancy in the August 31, 2020 quarterly report regarding ownership or possibly my definition of public float is not accurate. There's a table that's list ownership of 10% or greater, which totals 74.9% of the shares outstanding. However, there is a line item that shows the public float at 13,538,923 shares or 30.7%, not 25.1%, which it would be. If you use the number of the large holders, the 10% or greater as 74.9% -- sorry, there are so many numbers here. So the total shares were -- anyway, so you get the drift. They're confused because they're 2 different numbers, what they are calling slowed. And I actually have an answer for that, if you want me to take a stab at it.

Go ahead, take a stab at it.

Okay. So the one number that you see that actually says here's the public float, it's 13.5 million. That is taking the total number of shares and you subtract the restricted shares, that's the OTC market’s definition of it, but that number can't take into account the ownership of the large holders who are, in fact, they're not restricted, but they are not selling either. So we really can't -- we cannot capture the unrestricted shares held by insiders and other long-term shareholders. So the effective flow is actually less than 30% in my opinion.

Okay. That's true. There are some people who are -- yes, there are some people who are not restricted. Like for example, Horizon Kinetics itself owns like 200 and something thousand shares we actually bought, and those aren't restricted shares. And I personally, in November, I personally bought some shares in the open market, and those shares aren't restricted, and there are others. We probably should endeavor to get a better number. I'm doing it from memory, so it's probably not such a great idea, but that's a gist to it.

Yes. I think it's very hard to nail that down because it's always going to be an estimate. But anyway, it's certainly less than 30%, a very small float. So let's see. Now there is a question on the share repurchases, the shares that FRMO purchased from Steve Bregman, the 20,000 shares. It says that under the share repurchase program, could you shed some light on this transaction from FRMO's perspective?

Well, for everyone’s perspective, I'll let Steve opine if he has a perspective to it, but from FRMO's perspective, some shares were available in, I guess, you'd call it a block. I guess it's not really what multiple call block, but for us, it was a block. And I thought it was good value, and I bought it for FRMO. I made a decision to buy some. So that’s…

From my perspective, Steven Bregman here. I -- with respect to -- well, I'm speaking with respect to FRMO's perspective, is that Steven Bregman sold some shares at a price that was well below what they're trading for now and FRMO purchased some shares for a price that was well below we are trading for now.

I think that, that sums it up.

Yes. Well, we have 4 minutes to 6. So there were some questions on the rent fund. And you want -- maybe that's a different discussion, save those for…

Okay. Well, let's just take one, and then we'll call it a night and we'll pick it up the next time. Maybe people have other questions they can add.

Okay. Regarding the RENN Fund, Petrohunter was a significant holding, equity and bonds, which appears to be a 7-figure loss. But recently, there was a news alert regarding a payout from bankruptcy that reflected on the most recent holdings. Was this investment made during bankruptcy or in anticipation of bankruptcy? Or was this just a risk that turned south?

None of the above. So when we took over the RENN Fund, there was a security in there called Petrohunter. Petrohunter was valued at 0, that's just the way it was valued because Petrohunter had gone bankrupt before we took it over. One of the allures of the RENN Fund was as a security of Petrohunter, you're not paying for, it's bankrupt, except we thought there's going to be a bankruptcy payment. So that number, that cash payment was Phase 1 of the bankruptcy payment. There may be others. And that amount of money relative to the size of RENN Fund, that's a material number. And there may well be other ones. I can't guarantee that there are going to be other ones, but it might happen. So that was -- when you buy a fund like this, you sometimes buy undervalued assets. Now I can understand if from a pricing committee point of view, you don't know what's going to happen, so be conservative and value it at 0, but that doesn't mean that the probability of payment was 0. And it turned out we got some money. So I thought that was great.

That sounds good. Well, it's 5:58, and we can call this the end of the call and carry over the other questions. We can schedule another date, a follow-up?

Yes, please. Let’s do that.

Okay. So we'll just send out a press release and announce it.

Yes. All right.

Okay. That's the end of the call.

And you set it up and we'll deal with all the remaining questions and any questions that come in the interim. I'm very gratified that everyone attended, and we have so many intriguing questions. And I know there's more, and I apologize we can't get to everything because we just don't have the time, but we will get to everything and don't hesitate to put in other questions. We want to get -- we want to answer everything and we want to have a dialogue, so I think it's fabulous. And thanks again for coming. We're going to reprieve this very, very shortly to do part 2. And thanks for your interest in FRMO, and thanks for your support. And it's been great, and they're really great questions. So talk to you soon then. Thanks so much.

Thank you, Murray.

Thank you, guys.

This concludes today's call. Thank you for your participation. You may now disconnect.