ParagonsDAO should consider buybacks from the market to enable future partnerships and contributor incentives.
Motivation
Currently, the market value of PDT is low compared to the past. Many of the community think that it will increase in the future. This gives us an opportunity to recapture PDT at a perceived low market value, which could add more value for things like future partnerships and contributor incentives.
The market seems to be at a point where it no longer values the PDT token in line with its fair backing of the treasury and thus creates the opportunity for the Treasury to maximise its use of assets.
Specification
Community input has suggested that PDAO should either;
Opt 1
Buy back up to $5M worth of PDT at current market value.
Opt 2
Reduce ParagonsDAO LP exposure to capitalise on the already spent ETH in the pool to acquire the current PDT.
9M $PDT used to seed the pool initially
Currently holds 18.3M PDT as at time of writing
By removing 50% of the LP ParagonsDAO could effectively achieve a similar outcome of buy backs without putting the DAO in a position to expend further funds.
Reference to full proposal can be found in Paragons discord.
Opt 3
Buyback 10M PDT from Founders in 2 seperate tranches.
Claimable $PDT at a 40% discount
Vesting $PDT 70% discount
Final discount amounts to be determined by the Treasury Council.
Note: the toy example is using numbers that aren’t what would actually apply here. The treasury would set the figures for token based NAV and full NAV (including prime and NFTs)
I’d also scale down the amount from $5mn to about about $2-3mn and this would be an authorization, not a requirement to buy back. My sense is that the group wants to be cautious in deployment and we should be price sensitive.
I like removing some of the LP exposure, but I don’t think the effect is exactly the same. So I think we should do both.
I’d also advocate for flexibility in implementation: the treasury can buy on the open market, conduct OTC offers, and/or do inverse bonds.
To reiterate my reasoning on this:
-It isn’t about a short term pump for price action
-It is about buying PDT at a ridiculously good deal and taking advantage of market opportunities and lack of understanding. We should buy low and sell high - selling high when we can use the funds in a clearer way to drive value. A simple question to ask yourself is, do you think PDT is worth more than its current trading price?
-It is about right-sizing the base as we pursue value creation opportunities. It is easier to create more value per token when there are fewer tokens. We don’t need $5mn+ of tokens - our business is not capital intensive. We should stay disciplined as we build.
I agree Paragons should make the most of the opportunity to increase treasury assets at a low price.
The proposals stated are each a conservative approach. I also thinks its necessary the LP retains its liquidity, its always attractive to future investors to see sufficient liquidity in the event they need to have an exit for irl problems.
My view is a sustained buy back of token using the proposed formula makes a lot of sense. I also suspect when staking is enacted for PRIME, then PDT may appreciate in price, which could mean Paragons misses this opportunity. Therefore, I think the sooner this is enacted the better we will be as a DAO with a potential stronger treasury by investing in ourselves.
I don’t like the idea of trading our own token, buying low and then selling high. This proposal’s benefit to me is more of a prop up of our own token that we can leverage down the road in things like bonding events, etc to make our own token more effective/successful in those scenarios. (If we undergo another bonding event, we want to provide those who are trading their NFTs some reassurance that the token won’t tank below original value for ex.)
I also do not like using a majority of our current stables to buy our own token, $2m should be scaled back even further. I don’t want to see any large holders take advantage of these buybacks to dump.
At current market prices, $2m in USD would buy 33m PDT at face value and probably 20m conservatively once all funds are depleted.
Option 3
We buy back inactive founder tokens at a heavy discount, something like 1/3 of open market. Dilution proposal already pegs value by 50% and provides instant liquidity to the founders that would otherwise dump on our buybacks.
Instead of spending $2m on open market to get 20-33m PDT, we get 10m for a fraction of this addressing both current issues.
-Estimated inactive founders = 10
-Roughly 10m PDT for sale
-Buyback at 33% of current market price
-Total cost= 596,000 USD market x 0.33 = 196,000 USD buyback.
-TLDR, spend 196,000 USD to buyback 10m in PDT from inactive founders rather then spending 2m to buyback 20m PDT at open market.
Although I agree that the market price is undervalued, I’m not sure buying the token with the treasury is the best use of funds. I’d rather see the treasury deployed for its original purpose - acquiring the best blockchain-based gaming assets available.
Buying back PDT with the treasury may end up burning the treasury. I’d rather we grow it.
Removing liquidity seems reasonable, but is a bit if a different proposition. I think it would effectively increase volatility, not necessarily price. There would be less liquidity on both sides. Unless, we remove PDT on offer without removing ETH, changing the distribution of liquidity provided.
A risk here might be manipulation of the price oracle which underlies the fuse pool?
I like @Jcrew 's proposal of strategic buys best. Not sure how feasible it is (do these inactive founds want to sell at such a low price?). If possible, seems like a no brainer though.
