Nanalyze

Paragon’s Cannabis Themed Initial Coin Offering

We’ve been seeing a lot of ads lately about initial coin offerings or ICOs. In fact, while you’re reading this article you may see some ads on our site about ICO offerings. We don’t control what ads you see, Google does, but if people click those ads we get some dollars which we use to feed our team of MBAs. When it comes to ads for ICOs though, we think you shouldn’t click them, especially ones that look like this:

That ad is for Paragon Coin, yet another ICO offering to debut. When you look at investing in a company or ICO, you should always look at the pedigree of the company’s leadership. You may not recognize this former model outside of her normal attire, but her name is Jessica VerSteeg and her past acting experience includes a TV series called “Single Ladies” and “The Amazing Race”, both of which were natural progressions towards becoming the CEO of a tech company. Like many tech prodigies without a higher education, this former Miss Iowa model supermodel already has a startup she founded which is a “Luxe Marijuana Subscription” that targets females. For $140 a month, AuBox will send you Kush Cake Pops and Cannabis Bath Bombs, though it all seems to be “coming soon”. They’ll even get your dog high:

In order to shore up the advisory side of Paragon, she decided to call upon Jayceon Terrell Taylor. He must have liked The Game with Michael Douglas as much as we did because he decided to start calling himself “The Game“. Straight out of Compton, Jayceon cut his teeth in the school of hard knocks selling drugs and mixing with Bloods. Even with the odds stacked heavily against him, he managed to turn his life around and became a notable rapper, record producer, and actor.

While he still runs into occasional problems like battery, sexual assault, and being shot at, he’s probably the only rapper out there setting a great example for impressionable young youth everywhere by inspiring them to get into technology with his newly assumed advisory role at Paragon.

Like most ICOs, Paragon is nothing more than a website and a “white paper”. Sure, the paper spells out an interesting plan. A WeWork type office space called “ParagonSpace” allows budding entrepreneurs to get together and build new cannabis ventures. Growers use the system to track plants using RFID which are then tracked through the entire supply chain from when they are harvested and sent for lab testing to when they land on the counters of cannabis dispensaries in every state where marijuana has been legalized. It all starts with a plan to purchase their first ParagonSpace location in Oakland around February of next year.

It’s a decently put together 44-page document. We figure it would take 2-3 MBAs a good week to put this together and it would probably cost between $10-20 thousand to produce. That’s all you’re buying here. In case there is never any active or liquid market for these tokens in the future, your money goes up in smoke – some of it, probably literally. This is the first risk highlighted in the Paragon white paper and the one you should be most concerned with. Even if there is a market for Paragon tokens, nothing guarantees that they will trade at this completely arbitrary valuation that’s made up out of thin air. Speaking of which, let’s look at the gamification that’s been embedded into this offering.

Paragon has created a total pool of 200 million bitcoins and is selling half of them based on the below presale terms:

This sort of “early bird gets the worm” approach does absolutely nothing for investors. If you were willing to sell shares at a 25% discount, are you trying to say that in 10 days the value of these tokens increased 13%? Not only is the initial “valuation” completely arbitrary, but this infomercial-like share discount scheme makes matters even worse. We’re seeing it across all kinds of these ICOs that are popping up like weeds and it is nothing but a publicity tactic. Then, we get to the actual sale of these tokens:

The initial token price will be set at $1 when it goes on sale on September 15. During the first 5 hours of the Token Crowdsale we will offer an early bird 5% discount, price will remain at $1 for the remaining of the first 24 hours and will increase $0.05 each 24 hours for 30 days or until all tokens sold.

This whole “price increasing every X hours” is a gimmick that makes people think that their investment is increasing in value when it’s presently worth about as much as a bag of dried parsley you bought on the street thinking it was skunk. At the end of the sale, the price of these tokens will be $2.50 to purchase. This implies that you should be able to sell what you bought in the first 24 hours at $2.50 but that is completely false. The ICO tokens you bought at a “discount” are worthless unless you can find someone to pay you for them. Remember what we mentioned before about how there may never be a market for these to trade on? Then there’s the bigger question that all ICOs can’t seem to answer. Who is holding this team accountable to make sure they actually do what they say they plan to do?

We’re not sure what people are thinking when they sink their money into these things, but perhaps this “review of Paragon” can shed some light on the naive thought process going on here:

While we’ve warned investors before about the dangers of investing in ICOs, and even more so about the dangers of investing in marijuana stocks, this may be the single worst “investment opportunity” we’ve ever come across combining the regulatory risk of cannabis investing with the complete uncertainty surrounding ICOs. If those reasons listed above are the most compelling selling points for this venture, then the person who wrote that review has no business investing in it – yet for some reason he did. An excerpt from an article on Cryptocoin News spells things out a bit differently:

While they failed to mention the pretty decent white paper that Paragon has put together, that feeling is still mutual. Perhaps the most incredible thing we learned when researching this article is that there are people out there who will actually take their money and hand it over to ventures like this one in hopes that somewhere down the line they’re going to be rewarded. Why would you ever take such a risk when there are so many other good investment opportunities out there with legitimate companies?

Sure, bitcoin keeps breaking new highs and many people have made lots of money by speculating on cryptocurrencies. That money has largely been made in bitcoin and other major cryptocurrencies, not the other 100s of “coins” that are now being minted left and right like this one. In short, the entire ICO space has become an unregulated isht show. When you buy these ICO coins, you give Paragon your hard earned money in hopes that they will give you more than what you invested at a future date. Go ahead and speculate all you want, but it is our opinion that you would have to be a complete and utter fool to invest one red penny in this thing. On the other hand, high risks can lead to high rewards and black swans do happen. As The Game says “Take me away from the hood, like the state penitentiary, take me away from the hood in a Casket or a Bentley”. 

While we don't have any meaningful amounts of money in bitcoin at the moment, we'd be more likely to invest by holding the actual bitcoin. As we said before, we are slowly accumulating bitcoins on Coinbase and logging in to a one-stop-shop couldn't be easier. If you click this link and put $100 in Coinbase, they'll give you $10 in free bitcoins (immediate +10% return) and we'll get $10 in free bitcoins to help feed our MBAs.

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