The health-care debacle on InTrade

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[The Intrade event derivative traders] “-are getting more and more alienated by the actions and judgments of Intrade’-s management.”-

Is InTrade mis-managed? Many people are starting to think so, apparently. Still think that Chris Masse of Midas Oracle is too much critical of InTrade, my dear Chuck?

Scrutinizing InTrades financial statement for 2008 – Part II

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Jesse Livermore (a pseudo):

More Intrade Financials

I paid 7.50 euros to see Intrade’-s full filings from 2008 at www.cro.ie. I’-m not going to post them publicly, because they contain the names and addresses of everyone who owns shares in the company. (Fun fact: John Delaney’-s address does not have a number, it has a name.)

A few new pieces of information:

-How can Intrade keep losing money? Like any other startup, by issuing new shares. Intrade issued $2 million in new stock last year. About 320,000 shares were issued, on a base of 1.2 million shares, which would value Intrade at about $10 million, the same as my ballpark estimate yesterday.

-I was correct about the valuation of the Tangible Fixed Assets. Intrade valued anything left over from Trade Exchange Network at $0, and depreciated computer and software equipment by 33% of the purchase price per year.

-The report does not break down expenses and revenues in great detail. It tells total employee compensation, and interest income, but does not spell out commission revenue or other expenses.

-Trade commissions are (properly) recognized only when they are paid. Trading fees are paid when trades are made- expiry fees are paid when contracts expire. Intrade likely recognized a good deal of revenue on election day, which at least mitigated their losses.

I don’-t view this with the shock of some on the Intrade forums. These numbers seem entirely reasonable to me. Intrade has grown substantially comparing 2004 to 2008, and even in the absence of legislative change, will probably be profitable in 2012. I’-m not going to short the contracts on whether Intrade will still be in business. Even in the unlikely event that Intrade were to close, there is no reason to worry about customer deposits.

Part I

The InTrade numbers

Blame the messy CEO -dont blame the media.

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contention

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Nothing is more untrue than that.

I do report things —-bad things, and good things (like the NKM scandal, which “-StrangeLove”- alluded to).

I give my opinions —-and I link to or re-publish other people’-s opinions.

If the coverage of InTrade has not always been positive, it is due to the *illegal* nature of their business and the many marketing and P.R. *mistakes* that (former accountant) John Delaney made —-you might remember that he acknowledged some of those.

As for BetFair, and you might remember that I criticized them in the harshest terms at times, the truth is that they are the most polite, correct, professional and ethical people in the worldwide prediction market industry.

InTrades financials: Where is the note #12?

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Our commenter:

We would need to see note 12 to understand what happened to the Share Premium account. It appears that the December 31, 2007 balance of the P &amp- L Account was applied against the Share Premium account. However, at September 30, 2008, the Share Premium is 1,063,614 higher than it should be (6,651,502 – 5,715,540 = 935,962 vs. 1,999,576). Note 12 might explain why.

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2007

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te1

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te2

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2008

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There might be a slight discrepancy between the accounts and the balance sheet.

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intradeaccounts

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intrade2

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I have obscured the personal addresses of these 2 persons:

intrade3-without-addresses

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InTrades Accounts and Balance Sheets – 2007 and 2008

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This material is available on: http://www.cro.ie/ .
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2007

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te1

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te2

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2008

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There might be a slight discrepancy between the accounts and the balance sheet. If you, too, spot it, then publish a comment just below, and we will share our thoughts. (Please, do not publish any negative comment that can be legally reprehensible.)

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intradeaccounts

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intrade2

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I have obscured the personal addresses of these 2 persons:

intrade3-without-addresses

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The InTrade predicton markets on the viability of InTrade wont reveal *ANYTHING* about the future of InTrade.

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It is impossible for any InTrade trader to know whether the financial accounting of InTrade is sound or not. Any commercial company surrounds itself with secrecy. Let alone an Irish company that illegally (from the DOJ’-s standpoint) exports its services to Americans.

UPDATE: See the comment #1 there.

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It was impossible for the InTrade traders to divine whether Yahoo! CEO Jerry Yang would step down.

(In passing, note that InTrade has expired this contract hours after the breaking news hit the wires.)

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It was impossible for the InTrade traders to divine whether Unlawful Internet Gambling Enforcement Act of 2006 would be voted and enacted.

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The InTrade predicton markets on the viability of InTrade won’-t reveal ANYTHING about the future of InTrade. It will just aggregate InTrade’-s PR output.

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As for the “-business development initiatives”- planned by the InTrade executives, I wish them the best of luck. However, I remain skeptical, since I don’-t see what can replace the 2008 US elections in terms of attractiveness —-now that the SuperBowl has been sacrificed.

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After the demise of TradeSports, questions (re-)surface about the viability of InTrade.

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My post about the sudden closure of TradeSports was the #2 most downloaded webpages, yesterday —-even though that post was published late yesterday. And this morning, I am receiving tons of e-mails from the InTrade and TradeSports traders (they are often the same people).

My reasoning:

  1. InTrade is the twin site of TradeSports.
  2. The closure of TradeSports was sudden.
  3. The TradeSports owners have closed shop less than 2 months before the SuperBowl —-the biggest $$$ drawer.
  4. Now that the 2008 US presidential elections are over, the InTrade heyday is over. No more liquidity. No more media coverage. See you in 2010 and 2012.
  5. If TradeSports couldn’-t survive the Unlawful Internet Gambling Enforcement Act of 2006, I don’-t see how a lean InTrade could do.
  6. InTrade CEO John Delaney is not a truthful person. It is unlikely that any statement from him about the viability of InTrade should be taken seriously.
  7. Midas Oracle used to received many daily server requests from the InTrade-TradeSports team in Ireland. The recent web stats show a sudden drop. This might signal that some key employees are in vacation —-or have been laid off.
  8. UPDATE: They seem now unable to expire a contract in the evening, Irish time.

TAKEAWAY:

  • The InTrade traders should prepare themselves for the worse —-the sudden closure of InTrade.

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Chris F. Masse