FRMO Corporation (FRMO) Earnings Call Transcript & Summary

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. 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 funds. The opinions referenced on this call today are not intended to be assumed that -- it should not be assumed that any of the securities -- security transactions referenced today have been or will prove to be profitable, or that future investment decisions will be profitable or will 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. He will review the key points related to the fiscal 2025 second quarter earnings. And now I'll turn the discussion over to Mr. Stahl.

Okay. Thank you, Thérèse, and thanks for joining us everybody today. So first off, let me explain why my colleague, Mr. Bregman is not with us today because he came from vacation and found a pipe burst in his home and repair -- and there's no heat in his home as well. And it is pretty cold out there and a lot of work that needs to be done to repair that, which my understanding it is very little has been done so far. So he has his own headaches. So we can excuse him and I will be doing the call. I hope you don't mind. And let's turn our attention then to the FRMO. So I'll start with just some highlights of these recently released financial statements that may not be entirely obvious, even though you can find some of this information in the footnotes. To begin with, so you're probably aware that Horizon Kinetics is now a publicly traded company. So you'll see on our balance sheet, investment in Horizon Kinetics Holding Corporation, formally Horizon Kinetics LLC at November and you'll see it carried at $16.2 million. It's important to state that is done via the equity method. That's not done by the market value method. So you took the market capitalization of Horizon Kinetics and multiply it by proportional ownership. This is not the number you're going to get. You're going to get a bigger number. So I just want to make that clear to everybody, also in case it isn't clear. No matter what Horizon Kinetics does in terms of its revenue, we've been heating this revenue participation at cost, and what I'll say is there are alternative ways to value it. I just want to point out that we carry it at cost. Now some other things. The column I refer to sometimes security sold short and you'll see proceeds of $10.8 plus million and market value over $1 million. We are shorting, selling short path-dependent ETFs, and you can tell how much we sold short in the quarter because all you have to do is compare November 30, security sold short to the May 31 number. You can compare the market values. So these path-depend ETFs are really dysfunctional and sometimes they go against you, and it happens, sometimes on our balance sheet. But in the focus of time they will gradually, inexorably make their way to 0. And you can see the unrealized profit we have, and that has contributed in no small measure to our cash balance, and we're going to keep doing that. It's not a big part of our strategy, but it's a very lucrative thing and we're keep doing it. Now right under that, you'll see this deferred tax liability. Little deferred tax liability relates to that. A lot of the deferred tax liability relates to the securities we own that we just never sold. And part of the deferred tax liability relates to where we are, FRMO physically located, our place of domicile. And if our place of domicile were different. It's possible that number could be lower, maybe even considerably lower. Can't promise anything, but that's something that we are in the process of studying. As a matter of fact, 5 minutes before this call took place I was involved in a conversation relating to that and expressed my views on that object. So we'll see what we can do about that. Now there are some other things that don't really appear on our balance sheet and don't give you a lot of information about the footnotes. In the footnotes, I'll just mention 2 of them. And one of them is Winland. In Winland, you'll be aware, as of the quarter end process, for us this is 11/30, we had 1,946,677 shares in Winland. We purchased more since the end of the quarter. So we own in round numbers, this is not exact, of course. We own about 40% of Winland. And one of the things we're doing is we buy stock in the open market, we also make direct equity investments in Winland. Now we're doing it with a view to not just increase in our ownership, it has an economic purpose. It's worthwhile to explain what the economic purpose is. We are changing considerably the way we mine. There are 2 dimensions the way we mine. I am not going into the mining technology too much other than to say that if we ever get above 50% of Winland, Winland is going to be a reporting company, and we're going to tell you a lot more about what's going on in Winland. In any event, the shares, which are used to buy equipment. The shares are issued on day 1. The equipment takes some number of months to break even. In our specific case, what we're buying, we're going to break even in -- depending on the breaks, 8 or 9 months. So the dilution is immediate because the shares are there. It takes 8 or 9 months to make up for it, and then we progress. The objective being that the number of coins we have per share should be increasing. That's really, really important, and that's the thing that I want to stress. Why should anyone buy a mining company in preference to an ETF? And there is only one reason. Because in ETF, the number of coins per unit because their fees are going to be going down. So you can mine and you can get a number of coins per unit or per share, if you prefer, to go up. That makes the corporate form a better way of accumulating Bitcoin in ETF. That's the object of the exercise. That's what we're doing. We're doing the exact same thing in Consensus Mining. You will note in the footnotes, we have a small investment in Consensus Mining. Is to be hoped that Consensus Mining will be publicly traded, listed and reporting. I am told, don't hold me to this, because I'm told by my legal advisers that we should be traded in about 30 days, whether that's sure or not, time will tell, but that's where it is. The way and manner in which Consensus differs from Winland is. Consensus has not issued any shares in a very long period of time. So as we are improving our mining technology, there's no shares issued the expense of which has to be overcome. So the full benefit of any changes in technology are realized by our shareholders with an immediacy literally that day as opposed to what would happen in Winland, where it takes a certain number of months. That being said, that's the only considerable difference. The only considerable difference. As a matter of fact, it is the only material difference between the mining strategy. It's exactly what they're doing technologically is the same. We're trying to keep it within reason, proportional, the capitalization of both companies. You don't favor one relative to the other and they are both doing exceedingly well. As I said before, in the -- if we ever get to a point where FRMO owns 50% or more of Winland, we will be consolidating Winland. Winland will become a reporting company and you'll be able to see a lot more than you currently see. So there's a lot of fun things happening in the world of cryptocurrency mining that hopefully you will be learning about shortly. One other thing I'd like to point out that our book value per share, and our book value is a record. So that when I say book value, I'm referring to the line that's entitled. shareholders' equity attributable to the company $413.6 million divided by number of shares outstanding, we have a book value, and that's a hard book of $9.39 a share. There's a lot of things going on at FRMO that you really can't express in book value. The things we said about cryptocurrency are just one important part of it. And as far as the investments we have, you can observe them, you can see what's going on. You probably have some questions about those. And when I find out about them, I will answer it, but that's the overview. So everything is going reasonably well, and we're going to do our best to make it a lot better. So with that Thérèse, hope that's an adequate introduction of what we're doing. And maybe you could read me these questions, and I will endeavor to answer each and every one of them.

I'll be happy to. Your first question is consistent with the thesis on MIAX, has management ever looked at ABX exchange and the symbol is ABXXF, like Frank.

AB, you said FF -- what is that symbol?

ABXX, like x-ray, Frank, F -- ABXXF.

Can't say I am familiar with it, never really looked at it. So what I will do is I'll make a note, and I'll look at it the next time we get together. I'll have an informed opinion for you. At the moment. I don't have an informed opinion. So we'll see what I learn about it.

Okay. Would you please provide an update on current status of the company's investment in the Miami Futures Exchange and possible path to profitability.

Well, I can't comment on what profit or lack thereof there is in MIAX or the Miami Futures Exchange. All I can tell you is the futures business in general for everybody is a very profitable business. Exchange is for just about everybody is very profitable. Some firms have more profitability than others, but they're basically very profitable businesses. The reason they are very profitable businesses, the incremental revenue, which is the growth you get goes right to the bottom line. They sometimes are incremental investments you have to make, but they are not really huge incremental investments. So the path to IPO. It's really a question of when you want to do it. So you'll be aware, until just about now. The IPO market, this only relates tangentially to MIAX, but the IPO market has not been very robust. The reason the IPO market is not very robust is that the world investment is dominated by indexation. So an IPO rarely qualifies for inclusion in an index. Has happened but it's very, very rare. So active managers or in the era when active managers dominate the investing, initial public offerings were highly sought after. Now initial public offerings, there are some successful ones, but they're more the exception that proves the rule. So you have to pick your moment. You're going to have a window and you want that window to be such that you get the valuation you think you deserve. And that's all I can say about the IPO. The market has not been all that robust. If you look at MIAX in the press releases, 90% of what you need to know about the company is right there. So the greater volume you have, the better it is for your exchange. And you can see that even though it doesn't hit record volume every month, it hits it a lot of months. So you can get a pretty good indication that things are going pretty well. What next, Thérèse?

The next comes from someone who prefaces his questions with, as of sending this e-mail, we are holders of over 10,000 shares of FRMO. We kindly request the following be addressed on the conference call this afternoon. Please provide a current book value update as of January 17, 2025, versus November 30, 2024.

Okay. Well, I gave the relevant number, I can't give you the -- I'll tell you why I can give it to you. I can't give you January 17 number. And I'll tell you why I can't give it to you, although I wouldn't mind giving it you because of the revenue share I referred to. So FRMO is on November -- is on May fiscal year. So November is the quarter. Horizon Kinetics is on December quarter and sometimes Horizon gets annual performance fees. Because Horizon has not disclosed its earnings yet, they have not calculated what, if any, performance fees they have. And therefore, in order to give you the book value I would have to know with some degree of precision what the performance fees are, if indeed there are any performance fees. So I have to disclose things about Horizon that Horizon is not yet in a position to disclose. So we gave you that number. And since Horizon is not in a position to disclose it, I can't disclose it. So I can't calculate the book value, much as I would like to. So I just can't give you the January 17 number. It's just the way it is. I would put the FRMO shareholders who are on this call listing a number. And if I would give you that number, I'd put them at an advantage relative to Horizon shareholders that may or may -- who also in FRMO, that may or may not be on this call, and you can understand that would be legally very problematic. So I can't do it. But it's not me. That's the legal system we live in and I have to obey the rules. So that's -- whether it's fortunate or not, that's the way it is.

Thank you. Please provide color on the most optimal approach to ascertain mark-to-market value on positions in the Horizon Kinetics managed funds and ETFs, which are not included in your direct and indirect public securities and crypto holdings. The strong increase to $18.66 in book value from $11.43 last quarter was clearly linked to increases in asset positions beyond Horizon, LandBridge and TPL and crypto holdings. It would be helpful for some review on how investors should model accordingly.

Okay. So I got a lot to say about that. The first thing is, so it was a press release that you're reading from. And I don't think that was a press release that should have been released. I'll explain why in just 1 second. And there was an update to that. I don't think it was correct either. And I'm going to write myself. So when that initial press release -- when there is a sentence in there that says $18 plus in book value on a fully diluted basis. That's not correct. And the reason is correct -- the reason it's not correct is because it's not in accounting sense correct to take the book value, which is the same, which is a synonym for shareholders' equity and divided by the number of shares, roughly 44 million and come up with that number. The reason is because roughly half that figure doesn't belong to the shareholders of Horizon. So when somebody makes that statement, somebody is basically inadvertently giving one the impression that the entirety of book value belongs to the shareholders. So here's the number to shareholders think it belongs to shareholders. It's $413.6 million. Noncontrolling interest $407.8 million. What that is, it's funds that FRMO controls. And under accounting rules, it's required to consolidate. So -- but that doesn't belong to the shareholders. And you'll see in all the earnings releases and these financial statements, we back it out. So we're following the accounting rules, we consolidate for reporting purposes, and we back out. So if you take the roughly 44 million shares outstanding and you divide it into 413.6 million shares, you come up with $9.39 in round numbers in book value. That's our book value. That's a number that you should be focusing on. It's not $18-plus. So I just want to correct that even though an effort was made to correct it. And I am going to write myself a new press release and I will make it crystal clear. But I want to make it crystal clear right now that's a number. Now the thrust of your question is, so what are the determining positions? Well, determining positions are the ones that are released. They really are top 5 holdings. This is Texas Pacific, obviously. The 2 crypto positions. Now there are 2 crypto, used to be one, used to be the Grayscale Bitcoin Trust, GBTC. They did a spin-off of what they call Bitcoin mini BTC. So those 2 positions. There's Miami International Holdings and there is Winland. Those are big positions. And there is some other crypto. So the interplay of all those things plus the increase or decrease in our cash balance, that determines our book value. There is some fee income we get from Horizon, and that's a determining factor. But those are the variables. There are some other securities holdings. They're relatively small, but there aren't any other hidden positions of note. There are many other positions, but they're not substantial. And while they may be rounding errors in book value, that's all they are at the moment, rounding errors in book value. So that's what you should be focusing on. So I hope I made that clear.

I believe you did. Okay. OTC pink sheet designation and quotation transparency. With respect to FRMO's pink sheet status, what is required to uplift to either OTCQX. Well, I think that's a typo. What -- to uplift OTCQX. And is management open to moving forward with the same? If not, why not? If OTC uplift is not an option, at a minimum, proper quotation is important to investor transparency and desirability. The cost to add Level 2 quotes to pink sheet listed companies is about $4,500 annually. Is there any valid reason why FRMO cannot add this service without delay to better service the investment community? So that's 2 parts to the question.

Okay. Well, it's really very simple. There's no good reason not to uplift. We are working on an uplift. When you finally get the information that we have uplifted, I have no doubt you're going to be very pleased with the actions that we take. So we want to. We're working on it. See then your question would be, well, what's taken so long? And I hope you can see we had to bring Horizon public. We're working with Winland. We're doing cryptocurrency. We're trying to do Consensus Mining, get that public. We've got a lot of things going on. And I hate to admit it, but we can only do so many things at 1 time. Each individual enterprise has slightly different issues. They're not all that complicated, but there are slightly different issues. And you would be astonished at things that you think are very, very minor in disclosure items. The regulators think they're significant and we have to get information. You would think we have every single piece of information at our fingertips. And sometimes, it actually takes weeks to get the requisite information. We have to submit to one authority and that authority has to submit it to another authority. And sometimes months go by before we get an answer as to whether our submission is adequate. And if it's not adequate, we need to get some more information. And that's what takes so long. So we're doing it for a variety of companies. We just haven't undertaken the complexity of simultaneously doing it for the others. So I made allusion to Consensus Mining. I was told, and I'm sure it's accurate that it will be trading in 30 days, but I need to also tell you that's not the first time I've been told that it's going to trade in 30 days. So let's say, the [ flesh ] is willing but there are just things we have to do, and we live in a world of regulations. We have to comply with them, and it's easier said than done. I hope that's an adequate explanation other than the fact that we got a lot of things going on. So -- but we'll get to it, and it will be done.

Next, ongoing purchases of various public companies such as TPL continue without regard to valuation, such as the run-up to -- into the S&P 500 inclusion. What is the strategy to purchase public company shares more opportunistically at lower valuations? For example, Berkshire's discipline is currently on display only paying a premium to intrinsic value when purchasing -- repurchasing shares. Yet, Berkshire continues to purchase OXY, O-X-Y, as it is deemed a fair value. Both are opportunistic and active versus passive systematically -- systemically similar purchases.

Okay. So I would hate to compare FRMO to Berkshire Hathaway because we wouldn't compare favorably. But in any event, to answer your question directly. When you're outside and you say, why don't we purchase more opportunistically in relation to intrinsic value. It's not entirely evident to the outside world what the intrinsic value is. So because of my position, I can't really tell you all that much about the intrinsic value, but I can tell you this. So you see how the world is moving towards what the world says is artificial intelligence. What I say is high order computation. This is a big difference and if somebody asked the question, going to what the difference is, but I prefer to use the terminology, high order computation. High order computation requires enormous amounts of electric power, unbelievable amounts of electric power. And electric power requires a generation source. So let's just go through some of the choices. And I'll tell you how people discuss it conventionally. That will give you some insight on how do we look at it? And that will let you figure out what the intrinsic value might well be. So in terms of the conventional sources of power, we -- people will say, well, we have choices between coal generation, which is not very environmentally friendly. And of course, we have natural gas-fired generation, and we have nuclear. And people will talk about the differences, as if they are different technologies. And to the outside world, it really does appear that they are different technologies, and they have their advantages and disadvantages. But inside, that's not true. Because the common feature of nuclear and coal and natural gases, they are all thermal generation technologies. What does that mean? That means is in order to produce power, which you do in any of those technologies, you heat water, you boil water to create water vapor, steam. This steam flows through a turbine. It turns the blades of a turbine. And the rotational motion of the turbine generates electric power. So limiting factor is water. And I'll give you a statistic. The -- a typical, let's say, a 1-gigawatt power plant is going to use much more than 500,000 gallons of water a minute. And when I say use, I don't mean consume. I mean make use of. A lot of that water can be reused. So -- but not all the water can be reused because you'll know or you'll probably know, in accordance with laws of thermodynamics, there's no such thing as 100% energy conversion. It doesn't exist in the world. So -- and I'm just giving you a number for illustrative purposes, it's not even that good. If you are making use of 500,000 gallons of water a minute, 50,000 gallons are going to evaporate, probably more than that, let's say, 50,000 gallons a minute. Now take that 50,000 and divide that number by 42 and you get a number of something like 1,190. And by the way, I don't have a calculator. I'm doing this in my head. So 1,190 roughly barrels of water a minute. Well, there are 60 minutes in an hour. So multiply 1,190 by 60, you can get a number. And there are 24 hours in a day. So take that number and multiply it by 24. There are 365 days a year. And you're going to need that much water, except if you stay in that calculation, you're going to be wrong. And the reason you're going to be wrong is they're back to the laws of thermodynamics. You can't power a 1-gigawatt power center with -- a 1-gigawatt data center with 1-gigawatt of thermal generation. The reason is because the generation facility has to go down for scheduled maintenance and sometimes it goes down for nonscheduled maintenance. So you might need twice as much. So now you're going to need 2 gigawatts, let's say. This is just for illustrative purposes, the actual numbers are worse. Well, now I'll take the number you got and multiply it by 2. That's how many barrels of order you need. This is 1 gigawatt data center, except that's not good enough. And the reason isn't good enough because back to our old friend, the laws of thermodynamics. There's no such thing as 100% energy conversion. So the electric power that's coming through the cable is much greater than the electric power or, let's say, the rated electric power capacity of all the equipment you have in the data center. And the ratio difference is usually greater than 1.5. So you have to take that -- now 2 gigawatts, multiply by these 1.5, the actual number is more like 1.54, and you get to 3.08. So that's how much water you need. And we're not even talking about the water you need for cooling a data center. So -- but they haven't built data centers yet. Now a normal resource like oil or gas it could be in the ground in really great quantity, but it's finite. Eventually, it's going to run out. Water is forever. So what's going to happen is the water that you're going to be providing is going to go on for as long as it is data centers. So what's the intrinsic value of that? And you can see it in your financial statement. The reason you can't see the eventual statement because the data center hasn't been built. All you know is there's a certain amount of water flowing, which is possible to use for another purpose, but it isn't being used for that purpose yet, but it has enormous intrinsic value. So how can you lead that into calculation? You can't. So that's an important consideration. So looking from the outside, if you're not thinking about things like that, you're going to get a very, very bizarre idea what an intrinsic value for any of these things really is. So I hope at least gave you a little tutorial about things that are happening in the world of water. Water is an unbelievably valuable resource and look throughout the S&P 500 and how many companies can you find that have the ability to access enormous quantities of water. And I don't think you're going to find very many. So I hope that gives you an orientation of where we are.

Okay. The next one, first say congrats on all of your successes, including the very meaningful growth in book value per share. My question is, what additional levers can the FRMO management team pull to accelerate the creation of incremental value for shareholders?

Well, let's just say we're doing some things. Some of it I described in the cryptocurrency. Some of it I've alluded to that we might uplift. And when we have the bandwidth to uplift, that will be something. But there are a lot of interesting possibilities in cryptocurrency and there are a lot of interesting possibilities just in the world of data centers and that kind of stuff. And that's what we're working on. And we're trying to increase our exposure to that. We have some interesting investments that at the moment are small, but we are increasing them gradually in some measured pace and 1 day they will be big enough to talk about. So we're doing stuff.

Okay. The next one refers to book value. Again, I allude back to your comments that this number is not correct to you. The FRMO book value is now reported at $18.66 per share on a fully diluted basis. The current stock price as of January 16 is in the approximate $10 to $11 range. Does this mean that the marketplace is valuing the company at about a 40% discount? If so, has management considered. Buying stock in the open market, both to capture immediate financial value as well as support the stock price at a higher value, which would benefit shareholders? If the company has been purchasing stock in the open market, what will the company do with the shares, hold them as treasury stock or cancel the shares?

Okay. Well, I sort of addressed this earlier and I can understand why people read that press release and think our book value is over $18 a share, but I'll just stress again. Our book value is not $18-plus a share. Our book value is $9.39 a share. You can see what our trading price is and our hard book value, as calculated, is the shareholders' equity attributable to the company that comes off the balance sheet. It's $413.6 million approximately, divided by the approximate 44 million shares outstanding, that comes to roughly $9.39, that is our book value. So I apologize for the way the press release is worded, but I guess, in the future, I'll write it, and I'll rewrite this one and eliminate any ambiguity, but unfortunately, it went out. So we have to deal with that. Apologies again, but hopefully, it won't happen again. $9.39, that is our book value. So we haven't bought any stock back for the company.

Okay. The company has expanded the Board of Directors, adding 3 directors in October 2021, an additional director in November 2024 and then just announced a new director in the past week. Can you please discuss what strategic perspectives, these new directors have contributed to the direction of the company that are being implemented?

Well, I'll speak in general terms. So basically, we would like to uplift FRMO. We think there's a lot of great things going in the FRMO. And if you've got to uplift, one of the things you have to have is you have to have what is arguably a fully independent Board. It's one of the many things you have to do. So we have the opportunity to do it. And we decided to this is a time to do it. You don't have to do it all in 1 day and we didn't do it all in 1 day. And these are people who bring in different disciplines as far as other asset classes, legal, accounting that line of country. Just to make the Board as strong as we possibly can in preparation for the day, hopefully not long coming that we will be able to list. All that being said, at the end of the day, it's the management that has to do a certain amount of work and we need the bandwidth to do it. So if there's anybody who didn't do what they're supposed to do, I guess you have to say it's me.

Okay. Given that a strategic goal of the company has been discussed on past conference calls, is to acquire a controlling interest in Winland. How do you consider just doing a tender offer to acquire the requisite number of shares that would get the company to its stated goal much quicker. If not, does the company have a higher strategic priority?

No. Well, what we need to do is we need to -- we are in the process both in Consensus and Winland. We're improving, I think, greatly the mining protocol. I think I've covered this in prior calls. When you buy equipment, there are a lot of things that can happen and not all of them are good. So equipment can be -- become technically obsolete by new innovation. We don't want to do everything in one fell swoop. Because we might be confronted with some equipment that we had inadvertently bought that is becoming immediately obsolete. So you want to make relatively small purchases in equipment in exchange for small numbers of shares. I know it takes longer to do it that way, but it's for everybody's safety, because these things can happen. So far, we've been doing this a lot of years, we've been able to avoid those pitfalls by doing it this way. I hate to accelerate the process with the view of accomplishing our strategic goal and then fall victim to an equipment cycle that we just didn't see coming, because we are too focused on just getting to a requisite control interest. So I apologize for doing it in the slow way, but it is the safe way, and I think it's best for all the shareholders. So that's the way we are doing it.

Okay. There are 2 questions. I'll just combine them. They're asking about what investment A in Note 4 is? And that's basically it. Could you comment on its nature as an income-producing asset?

It's very simple. We have 2 big investments that they call Investment A and Investment B. And when we do our release of our individual holdings, anybody can see we only have 2 really tremendous holdings. And they are TPL and the GBTC or otherwise known as the Bitcoin or Bitcoin ETF. That's what it is. So it's no great secret. I don't know why they say that, but that's what they say. And I guess that's the standard way you write financial documents. They're a little bit obscure, but that's why we have this call that I tell you what it means.

The net income realized in Q2 was a significant increase from the prior quarter and prior year. Might such income be continually realized in the coming quarters or is such performance is syncretic in nature?

Well, the performance is attributable largely but not entirely to the performance of Texas Pacific and the performance of Bitcoin. So I don't know quarter-by-quarter what the performance is going to be. But as far as I'm concerned, we're going to hold those securities. I should warn you, it's possible that those could decline in value. And if you go back enough quarters, you'll see we lived through a number of declines. And at the moment, the plan is to hold the securities, but so far, we haven't experienced or the client, like we had historically, but it could happen. But we think it's in the best interest for everyone hang on to these securities. So we're hanging on to these securities. Those are the 2 securities, and that's largely what contributed to the net income as reported. And I should say the word realized. We didn't realize it in the accounting sense. A realization event would be if we sold them and got cash for them. We still have them. We didn't sell anything. We didn't get any cash from. So it appreciated. So we're marking to market as required by the accounting guidelines. We didn't realize. If we had realized we'd have to take and pay a certain amount of taxes, which we really don't want to do. So we have $78 million in deferred liability. At the moment, it's a theoretical abstraction. We're not paying it. So we are actually earning a return on $78 million that technically speaking, belongs to various entities of the government. And we don't have to pay them until we actually have a realization event. So I hope that addresses that.

Would you please explain again the mechanism by which miners decide to buy/sell Bitcoin or machines? For example, if a miner believes Bitcoin is going to increase in value, I believe you said they would sell coins to buy machines to get Bitcoin at a cheaper price and vice versa? Or do I have this the wrong way around? I know you've explained this before, but would you mind doing so again in more detail? I'm trying to understand the way that the Bitcoin mining system and other similar cryptos are self-equilibrating systems.

Okay. I'll then do it. No problem doing it. I'll just say at the outset that what the question refers to is you frequently make reference and presentations to the self-equilibrating nature of Bitcoin. The reason I make that reference is sometimes people say, well, if a whole series of Bitcoin ETFs are going to be launched. And if they're going to raise a lot of money and all this Bitcoin is going to be locked into the ETFs, there will be a diminution of supply and demand is increasing and it will force the price of Bitcoin up. And that's actually not going to happen. Before we get to the explanation -- a minor reason which we normally don't touch on, why doesn't it happen is because that Bitcoin is now locked up in ETFs. It can always be gotten to. First of all, the ETF is a publicly traded security. It could be sold. And the Bitcoin ETF were sold and nobody wanted to buy the Bitcoin ETF. The ETF had no alternative, but to put Bitcoin back in the market. So the premise that Bitcoin is stuck in ETF is a fallacious one, but that's a minor reason and the major reason. So say, Bitcoin were to rise in value, whatever the reason is, let's say, Bitcoin in the next 10 minutes, doubled in price. So if Bitcoin doubled in price, the first thing that would happen is that it's much more profitable to mine than it was before. So you had 2 choices, always in Bitcoin. You can buy Bitcoin in the open market or you can mine Bitcoin. Now it's possible that the Bitcoin mining equipment could rise in value too, but everybody in the world of Bitcoin knows, there is a halving coming. At the moment, that halving is 1,100 plus days away but it's still a halving. What does that mean? That means the block reward you're going to get from mining Bitcoin in 1,100-and-some-odd days is to be cut in half. That's why they call it the halving. So if Bitcoin were to double it makes absolutely no sense to pay twice as much for a machine because it's not going to have the same profitability in 1,100 or so days. So you would have to make it -- it might go up in the rig, the mining device might go up in value, but it's not going to go up at the rate the Bitcoin went up for reasons that now you understand. So it will be possible to instead of buying a Bitcoin, buy rigs and produce the Bitcoin. Because the miners have to contend with the halving and if people buy Bitcoin, you don't have to think about it really. And there will be an arbitrage. It will be cheaper to buy rigs and create Bitcoin than it is to buy Bitcoin in the market. So some people inevitably come to the conclusion that, let me sell my now doubled Bitcoin and buy rigs. As they are selling Bitcoin and buying rigs, the price would equilibrate. And that's why it's a self-equilibrating. It was designed to be self-equilibrating, so you couldn't have these bizarre moves in supply and demand, like you do in money conventionally. Because there are shortages of money. There is an oversupply of money, which causes inflation or what happens in commodities with oil or gold or silver. So whoever it was, whatever team it was that designed Bitcoin thought this through extremely carefully. So if you read the original Satoshi working papers on Bitcoin, you will get the sense that this was thought through very, very carefully over a long period of time. And the equilibration features of this were inserted deliberately. So I hope that's an adequate explanation.

Yes. In the previous call, Mr. Stahl mentions that regarding the Bitcoin network and its security, "The last thing we want is scalability." If scalability is not desirable for the Bitcoin protocol? And if Bitcoin is not meant for small transactions, what is management's vision for what Bitcoin should ultimately be used for, say, 10 years from now?

Well, let's divide it in 2 parts. Here's what my personal view, I don't think Bitcoin should be designed for the following. If you want to go to the supermarket and buy a loaf of bread, that's not what Bitcoin is for. So it's not for grocery shopping. It's not for paying your ordinary bills. It's not for going to movies, it's not for going out to dinner, it's not for any of that. It's designed to be a store of value. And there are other coins that could conceivably be designed for minor transactions. One possibility might be Litecoin, another possibility might be Bitcoin cash, another possibility might be Dogecoin, another possibility might be Solana. Those are all possibilities. And maybe it's going to be all of them. So the designers of Bitcoin, what they didn't want is, they didn't want the large financial firms to dominate Bitcoin mining. So the way they provide for that is they limited the block size. If you limited the block size, they put a limit on a number of transactions you could do in a 10-minute interval. Now in principle, in a computer science sense, you can increase the block size tenfold. You can increase the block size a hundredfold. You can increase it thousandfold. It's possible to do that, it's not difficult. It's just that whenever presented with the opportunity to increase the block size, like in the Bitcoin forks as in the case of Bitcoin Cash or Bitcoin Gold or Bitcoin SV, 99%, maybe more than 99% of Bitcoin holders refuse to take the fork seriously. So in the case of Bitcoin Cash, which is the most popular one, Bitcoin Cash has a market capitalization that's something like -- this is a round number, but it's not far from the reality. It's not accurate, but it's not far inaccurate. It's about 0.5 of 1% of the mining network of Bitcoin. But Bitcoin Cash is a much bigger block size. Some people want it, they'll do it. But they obviously don't want it because we don't want a system that's dominated by a handful of financial firms because we've already had that. It's created all sorts of incentives to make rules around money that do not favor the average person. That's what goes on as far as the block size debate goes. So I'm one of the people, the 99-plus percent who agree the block size should remain small. Not just because there are a small number of transactions, it does not follow that it will not be a big market. How can we establish that? Well, look at the art market. So how frequently does a van Gogh's painting trades or a Monet painting or Picasso painting. They are not all that liquid really. You can go months, sometimes years and no example trades. And yet, the art market is a tremendous market. And it happens to be a store of value. And for the people that are in the art market, they seem to be very satisfied that it functions well as a store of value. You don't need a lot of trading activity. The people who know what the art is worth, when there art comes in the market, they are invited to bid on the art and it generally gets sold. So it's sufficiently liquid for the purpose of the people and it stores value via that modality. Now Bitcoin, having said all that, right? I don't want to leave you the impression that Bitcoin is illiquid. So I write about this all the time. So if you want to measure liquidity of Bitcoin in dollars, in U.S. dollars, which I think is the way to measure it, you don't want to measure it in coins. The reason I want to do it that way is I want to compare it to the stock market. So I don't want to compare the number of coins that trade in Bitcoin to the number of shares that trade, let's say, Apple, which is the biggest stock in the S&P. Because they're in conventional quantities. But you can give them a common denominator with dollars. So believe it or not, trading volume measured in dollars on a daily basis, of Bitcoin is considerably greater than trading volume measured in dollars of Apple, which is the most liquid stock and the biggest stock in the S&P 500. So Bitcoin trades with a volume that's considerably larger than Apple. I think that's adequate for the purposes of most people. And you can verify that this very minute, if you want, because you can key in the following website bitinfocharts.com. And if you scroll down a number of columns, you will see the 24-hour volume of Bitcoin, last 24 hours. And I didn't look it up today, so I don't know what that number is going to be. And the market traded today, and you can see what the dollar volume of Apple. You can take the price of Apple, multiply it by number of shares traded today, you can get the today's trading volume. The only difference is the -- well, 2 differences. The first difference is Bitcoin is bigger, considerably bigger. The second difference, Bitcoin trades 24 hours a day, 7 days a week. Apple trades only on business days, between the hours of 9:30 and 4:00. So you tell me which one is more liquid. It's very, very, very liquid. It doesn't need to be used by a pack of chewing gum to get liquid as anybody can clearly see. Now by the way, another thing I'll tell you. So that number you're going to see on bitinfocharts.com, which is a big number that's uneven to the full trading volume of Bitcoin because that number only refers to demand in Bitcoin that changed hands on the blockchain. There are lot of Bitcoin that changes hands, not in the blockchain. So if I have a Bitcoin in Coinbase and you want to buy my Bitcoin and you have an account in Coinbase, Coinbase is going to move my Bitcoin to your account, your cash to my account, and it's never going to go into blockchain and it counts for the trading volumes. So if you really want to get that figure and look at the real volume, which is the volume you should compare Apple with, you should key in the following database, coinmarketcap.com, and Bitcoin is the biggest market cap. So you scroll over to right, and you'll see the last 24-hour trading volume, and you'll see it's enormous number. And it should satisfy needs of liquidity for anyone. And I believe, and please correct me if I'm not right, it has more trading volume than just about anything in the S&P 500. Next number, I think...

The next is also Bitcoin related. Why are we still in the Bitcoin mining business? The price of Bitcoin has gone up over 100 times in the past 7 to 8 years or so. If Murray believes that Bitcoin will still appreciate by some X level factor in the future, can you opine on if he still thinks that mining will offer a better return than simply buying Bitcoin and holding it for the same period of time?

Now it should be self-evident that mining has already offered a big return because all you really have to do is -- while you can't see it, but if you were to see it, we know what the shareholders' equity of Winland is, and we know what the market value of Winland is. And Winland trades at 4x plus book value. So the reason it does that is because there are now less than 1.2 million coins that can be mined. So the idea of just purchasing coins eventually is going to be problematic because the people who want to own Bitcoin or they might them. It's going to be hard to accumulate a tremendous value of Bitcoins. You can do a lot better if you simply have a corporation, and you increase number of coins you have per share of the corporation as opposed to buying a Bitcoin ETF and having the number of coins per unit ETF decline. That's what happened because the only asset it has is Bitcoin and there's going to be a fee. The fee might be very small, but still fee. So the number of units per share, no matter how much money that Bitcoin ETF raises, number of units per share is going to be in decline in the exact same way as number of ounces of gold you have in a gold ETF is always in decline. It may not be much but that's what's happening. So if you mentioned if you had a business and your gold business, you increased the number of ounces of gold you had per share. Wouldn't that be better? And one day, someone is going to do that, so far, no one has although some years ago was a corporation that tried it, they were very successful at it, but ended up getting bought out.

Another Bitcoin question. Now that Bitcoin ETFs have been approved, the discount to net asset value has largely gone from GBTC or any other ETF. Without this discount, it would seem like there is little reason for FRMO who has a long-term view of Bitcoin's value to not simply hold real or direct Bitcoin now. For example, to capture the additional call optionality of any future hard forks. Is there any reason to continue buying Bitcoin through ETFs?

Well, important fact, we really haven't bought much Bitcoin by ETFs, even though we have bought on certain days a very tiny amount. And most of the Bitcoin that we've been accumulating has been through Winland shares and Winland mining. So we are doing it. But rather than buy it, we prefer to make it.

Okay. With the FRMO stake in Winland nearing ever closer to 51%. How would FRMO manage Winland better or differently than it is being managed now once the FRMO is officially in control. That is what changes would FRMO make to -- make at Winland that would make it better under a FRMO ownership than at present? What does FRMO plan to do differently to compete with every other Bitcoin mining operation? And how does management reason about the competitive landscape of Bitcoin miners globally and among other miners strictly within the U.S.?

Okay. A couple of parts there. Number one, Winland is more or less being run the way we'd like it to be run right now. So we own greater than 50%, is not going to change in any material way. It's going to keep doing what it's doing. It just might do it at a larger scale, but it's going to keep doing what it's doing. That's the first point. Second point is, what are we doing that's different than the other miners. I can assure you, we're doing something that's very, very different than the other miners are doing. There are, I think, 12 publicly traded mining companies and what we're doing is considerably different. So what I can say is because Consensus is doing the same thing, Consensus is getting ready to be publicly traded. I just can't say that much about. But keep your eyes on Consensus, and you'll really see some interesting things. So once it's publicly traded, we'll have the ability to talk more freely. You'll see what we're doing that's different. And I think you're going to find it to be pretty creative.

Okay. With TPL's earnings multiple now trading near historical all-time highs, can management give some commentary on how they believe the company's growth prospects justify the present earnings per share of that multiple? And how they generally model the business and reason about its valuation? I'd note that the recent multiple expansions starting around 2023 up to today has occurred while quarterly earnings per share has remained rather static. It is understood that TPL has many advantages and that valuation heuristics do not capture the full picture of the company. But I'm curious about how management inventories and models TPL's advantages that ultimately translates those assets and advantages into expected cash flows to the stock such that management can be confident in continually averaging into the stock even at current prices as can be seen in the recent filings?

Okay. So when we say management, I just want to make it clear, we're talking about FRMO management, not TPL management. I don't want to, in any way, speak for the TPL management. We're just speaking for ourselves. So one of your earlier questions, I went through the analysis of water. So the -- what is technology as a percent of the S&P 500, it's obviously a very big number. Some of the technology in the S&P 500 is not even in the technology sector, it's actually in the communications sector. It's even in the consumer sector in so far as Amazon Web Services. Part of Amazon obviously competes with Google, obviously competes with Microsoft, which is in the information technology sector, Google and the communications sector and so on and so forth. And Meta Technologies, AKA Facebook, it's also in the communications sector. So arguably, the technology sector is way over 40% of the S&P 500. And the consensus view is that's going to grow at double-digit amounts and because of the data center movement. So as I answered the question previously, there is a limiting factor in data centers. They need a lot of water. And there aren't too many places to get the water. That water is going to be used. There's no doubt that, that water is going to be used. So you can't simply take the PE ratio of TPL or the other company known as Landbridge that's in the same business and say, well, it's overvalued because if you do that, you're valuing the water at 0. You can't value the water at 0, because if you do you're making a colossal mistake. So you have to come up with some kind of value. So the way I did it in this exercise was assume there is a data center somewhere in the Permian Basin. And that exercise, if you really want to go through in detail, I don't want to do it again because you can read the transcript. But I went through, it doesn't matter what the power source is. It's always going to be a thermal plant. Now people could say, thermal plant could be coal, thermal plant could be nuclear, thermal plant could be natural gas fired. At the end of the day, you've got to boil water. So people will say, "Well, what about wind? What about solar?" And it can never be a tremendous source. One reason is because those technologies are area dense. You have to cover a lot of it. Nobody wants to live in the middle of a bunch of windmills. You have to cover a lot of area and it's just very expensive to do that. Same is true of solar. But much more importantly than that, they are variable sources of power. I don't mean they are variable in the sense that when it's dark, you don't have the sun, and you can't use solar and data centers require a 24-hour time period. I mean it's variable in that the intensity of the sunlight when you have sun is different at different hours of the day. One reason is the inclination of the sun with the earth is a different angle, and that will reduce or increase the intensity. Secondly, you could have haze, sometimes even on a sunny day, you have some intermittent cloud cover. You may say, well, that's only cloud cover for 15 minutes. What difference does that make? Actually makes a really big difference. The reason it makes a big difference is because the United States electric grid is designed to run at 60 hertz. So solar is a very big part of the mix and some clouds appear in the sky for 15 minutes, and there's a drop off in the amount of solar energy you produce. You don't have the natural gas or fossil fuel-fired generation on continually to immediately take up the slack. The drop in power, the older circuit breakers are going to kick in, you're going to have power failure. Why the circuit breaker is going to kick in because the power drops because it's cloud cover of 15 minutes. When the clouds dissipate, which could be in 5 minutes, the power is going to surge and it's going to damage the equipment, all the circuit breakers are going to kick in. So the system is designed to make sure that doesn't happen. So whenever you have solar, you have to have a fossil fuel backup. There has be immediate demand. So either the power plant has to be on. So nuclear, for example, it takes many, many -- you can't just push a button and turn on a nuclear power plant, it takes a while to heat up the water. Same is true of coal. Natural gas, because of its properties, you can do faster, even that you can't do immediately. So what you need is you need to have the power plant on even though you are not using it. And that's called a spinning reserve. So what is the point of saying I'm using solar power. And technically, you're right, you're actually powering your data center on solar, but you're running as a spinning reserve, a parallel wind or coal or nuclear, you're not actually drawing the current, but you're producing the power. So what are you actually doing? There are just certain physical realities that we have to understand exist. So if you want to have data centers, you are going to need a lot more power. If you want to have a lot more power, you need a lot more water. So you show me where in the S&P or even at the S&P, you can get those quantities of water. Because I will be very interested to find them because I haven't been able to find them, and I've been looking for many, many years. If you have something which is extraordinary, but at the moment, it's not applied at data centers. Another question that someone might ask me that I'm going to ask myself and then answer, maybe I'll preempt the question is what if they don't build a data center on your land. What difference does that make? You still need water and there's no landowner that's going to have enough order to service what's needed. The example I gave earlier in this presentation, which I hate to repeat because it will take 15 minutes, not that I wouldn't want to repeat it. I just don't want you to hear late at night. You don't need the data center. You can do very well if you never had a data center on your property. And by the way, the data from the data center, you have to have access to communications into the data center and communications at the data center. One thing I didn't cover is, I didn't cover the right of way or easement on the fiber optic cables. It's another source of earnings. So the greater -- the greater the geographical extent of your land, the greater easement is going to be. So if you have it -- here, just looking at a price earnings ratio, it's like having a piece of land in Midtown Manhattan. It's just a raw piece of real estate. That happens once in a while, you walk by and there's a lot. Sometimes to get a little bit of revenue, you'll see the owner of that plot will turn it into parking. To actually park some cars on it. So if you looked at what this owner of property would carry the market value relative to the little revenue they're getting from cars, you would say, well, this piece of property is trading at a PE of 200x earnings. Why wouldn't you sell it and go to something cheaper. And the answer is because it's not being applied to its best use, one day there's going to be a structure on that property. The property is in a key location, you can't ever duplicate that. So why would you ever sell it to buy a lesser property. So I hope I have addressed the question, sorry for the prolonged answer.

I think the next question has to do with location, and I will read it. How much of TPL and LandBridge's strategic value comes from its particular physical location along the Texas, New Mexico border versus, say, intelligent operations, which could theoretically be copied by well-funded competitors or from the particular quality of their mineral acreage of which better deposits could theoretically be discovered elsewhere in the U.S., for example, in California, if the politics there were ever to change. That is -- how critical is the position along the Texas-New Mexico border to the value of TPL and LandBridge? And are there other private or public competitors that can just as easily facilitate competing land use agreements with TPL and LandBridge's potential customers? Is it the scale of contiguous land tracks that make their assets unique, I'm trying to get an idea of the competitive landscape for TPL and LandBridge's land operations. And who management sees as the company's most significant public and private comps. I think you touched on the answer already.

Yes, I did. So let's just do it this way because there's a lot of parts of that. So as far as contiguous versus noncontiguous, there is advantages and disadvantages to each. So for contiguous and you want to do something, you don't have to ask your neighbor, you can just do it. That's good. On the other hand, if you're not contiguous, and some potential customer needs a lot of water. Even if the water isn't being bought from you is kind of across your land, if you have a huge geographic extent. You are going to get a piece of it anyway. So there's an advantage to being noncontiguous, if you have a big enough geographical extent. And being near to the Texas Mexico border is a pretty good thing. Why? Because the state of Mexico, doesn't allow anyone to dispose of produced water in the ground. So that produced water comes to Texas. And 1 of the 2 things that are going to happen to it. Either it's going to be disposed on the ground, you're going to get money for putting water in the ground and your costs are not 0, but they're so close to 0, you might as well call them 0, a great business. Or you're going to get what's called beneficial lease, which is ways we figured out to recycle it, and use it for another purpose, like for example, the water component of power plant. Either way, it's pretty good. So now Texas versus California, there's no comparison. And it's not -- before you reach a conclusion, I'm not a big fan of the State of California. But I have to say that not everything you do is entirely logical. There's considerable oil deposits in Southern California. It's heavy oil. So there are different kinds of oil. The oil in Venezuela is heavy oil. It's like bitumen, it's thick like tar. The oil in Canada around Fort McMurray is the same thing. So you're not extracting it in the way you might think, you're mining it. You're heating up what they call a big hydro cracker. And it's almost like a refinery, a matter of fact it is, in a sense, a refinery. And that's the sort of things you'll have to do in California. So if you want to exploit the oil deposits in Southern California, it's got to look something like the oil deposits in Canada. And if you are to visit it, you don't want California to look like those areas of Canada or there are few people in California that would like or tolerate California be turned into what those areas of Canada look like. And I don't think it's likely to happen. There may be here and there, if the government were to relent, some projects that get approved. It's not like they happen in the short run, but it could theoretically happen. But it's not going to be a rival with Texas. Another issue is just get some geological maps and compare the other oil-bearing regions in the United States, like Denver, Julesburg or North Dakota with -- or even Oklahoma with the Delaware basin to look at the depth, it's 14 benches or 14 strata. It's just not even a comparison. So for a very long period of time, maybe several centuries that's going to account for the bulk of the oil production in the United States of America. The land sits astride the Capitan Aquifer. So it's a word that really comes from the Rocky Mountain. It's like an underground river. And how many of those you are ever going to find? There is one like it in California, in Central California, which you've never heard of, it's called Lake Tulare. There's no such thing on the map as Lake Tulare, it's an underground lake. And it's prolific source of water, and that's why California, believe it or not, is so prolific in agriculture. Could that theoretically be used for another purpose? Sure, it could, if you didn't want to grow all the produce that you grow in Central California. And if you didn't grow it, well then for produce and vegetables, we're going to pay a lot more money. So would the country tolerate that level of inflation in food? I don't know. I doubt it, but time will tell. That's another possible source. It's not as good as Texas, but it's a possible source of water. But I don't think it's likely that it's going to get exploited anytime soon. I hope that addresses that.

Okay. Last question. In the previous shareholder call, management made comments dismissing the idea that ETFs have a limited price impact on stock prices when viewed from a creation, redemption lens. For example, as concluded in Vanguard's "A drop in the bucket" study. Instead, management advised to look at the total AUM magnitude and overall trading activity of ETF shares themselves as a measure of their effects on the underlying stocks. Could management help walk us through and understand by the -- by what mechanism the trading of ETF shares on the secondhand market of whatever total AUM magnitude causes price impact on the underlying individual stocks when the ETF share creations and redemptions are not involved? That's our last question.

Okay. So let's just start with the S&P 500. There are 3 big S&P 500 ETFs, the S&P Spider, SPY, there's iShares S&P 500 IVV and there is the Vanguard S&P 500 VOD. Add the assets under management of those 3 ETFs together. And in round numbers, I'm not doing it. I'm not looking at anything, but just doing it in my head, you're not far from $2 trillion. So look at trading volume. How many shares of day trade, let's say, S&P Spider, it's a tremendous number. So there has to be a trading impact because the price of any member, the S&P 500 inside the ETF has to be same as the price outside the ETF. It has to be. So people are trading. I'm not -- let's say there were no S&P Spider. There are no redemption baskets created and no contribution baskets created for today, but there are tremendous number of shares traded. To say that it has no effect on price. So where does the price come from? That -- it only comes from, so Apple is trading and Amazon is trading, NVIDIA is trading and that generates the price of those securities, but they're trying to tell me that the trading of the aggregation of those securities in the ETF, which is even bigger, has no impact on the price. So if I want to buy one share NVIDIA, I will impact the price, maybe not a lot, but I'm impacting the price, maybe it's to the 20th decimal point, but I'm impacting the price. So all the hundreds of millions of shares that are traded of those ETFs containing NVIDIA, and containing Apple and Microsoft, all the other things, they have no impact on the price whatsoever. How can that be? Because if one side had no impact on the price and the other side had all the impact on the price, then there will an arbitrage. So to avoid an arbitrage, both groups have to have the same impact on the price. As you can clearly see, when you just look at the volume. And by the way, a lot of the volume of the ETFs is tracking the volume of the shares. They're trading in step with each other. So Apple, I think, 6.6% of the S&P, NVIDIA might be 6.3% and Microsoft is a similar number. At the end of the day, the sum of parts at 4:00, the sum of the parts has to be equal. So the unit value of the S&P is struck. Has to -- and the unit-value is struck every second of every day. It has to be the same thing as the individual securities, not counting the index. It can't be any different. So that's how I would explain it. I hope it's coherent.

I believe it is. Thank you. That was our last question. So if you would like to sum it up or have closing remarks.

Okay. I'll just say, you've been listening to me for almost 2 hours. It's been great questions, and I enjoy answering them. And I apologize for the confusion in the press release, but I just want to stress again, our book value is not $18 plus. Our book value right now is $9.39. So you have to look at the shareholders' equity attributable to the company. That's the key line, and that's $413.6 million, you divide by roughly 44 million shares, that's a number you should look at. So we are consolidating and that's just the way you do the accounting, but that's our book value. And we'll try to make the press release clearer in the future. So thanks for listening, everybody. And we'll, of course, reprise this in another 90 days or so. And I really look forward to the questions then. Thanks so much. Bye-bye.

The conference has ended. You may now disconnect.