Corsair On Cryptos: Put Us In The Jamie Dimon Camp

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Corsair Capital Q3 letter to investors expert on the topic of ICOs and IPOs

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Low interest rates may not be the only reason for stocks to be valued at higher than past historical norms, however. There seems to be somewhat of a shortage of stocks, as well. According to the Center of Research at University of Chicago’s Booth School of Business, there were an estimated 7,355 U.S. companies with publicly traded stock outstanding in 1997 as compared to fewer than 3,600 companies today. Booming corporate mergers and acquisitions, along with significantly larger private equity activity, has steadily shrunk the base of U.S. companies in which to publicly invest. One way to avoid being gobbled up by another company or private equity player would be to make sure your company is highly valued in the public markets. Thus, most companies are focusing on steps that maximize their corporate values. As you know, Corsair looks for companies led by “activist” management teams that are doing just that – pulling various corporate levers to maximize their values.
One asset class that continues to climb in value but clearly is not shrinking in availability is Cryptocurrency – digital tokens used to transfer value between individuals’ computers with minimal fees.

In simplistic terms, this “currency” of which Bitcoin is the best known, is “mined” in limited amounts by computer programmers using high-powered computers and are assigned a unique string of characters, letters, and numbers so that they can be uniquely identified when one owner transfers it to another.

In theory, similar to gold, these currencies are not susceptible to the same erosion of value that fiat currencies are. However, this assumes that this asset will remain legal to own.

Given the ease of use of these currencies for tax evasion or payment for other illegal activity, it is not clear that governments will always allow this.

In any case, put us in the camp with Jamie Dimon, CEO of J.P. Morgan Chase, that while the technology behind Cryptocurrencies will prove useful for lowering the cost and ensuring the security of various financial transactions, investment in this asset seems to be pure speculation at this time.

Importantly, we note that according to an Initial Coin Offering (ICO) website, there are currently some 200 ICO’s waiting to be floated to the public.