Mark Cuban ICO Investment: Should You Follow?

CryptocurrencyMark Cuban Cryptocurrency Flip-Flop on Bitcoin Bubble

Mark Cuban, billionaire owner of the Dallas Mavericks, was a vocal critic of blockchain technology. He even called Bitcoin a bubble, which gives the impression that he thinks it is all nonsense. And yet the Unikrn eSports ICO tells a different story…try Googling “Mark Cuban ICO investment” or “Mark Cuban cryptocurrency” to see what I mean.

Cuban is “thinking” about investing in an initial coin offering (ICO) held by Unikrn.

The company appears quite straightforward. It is an online betting platform where people can place bets on sporting events. (Source: “Mark Cuban, who just called bitcoin a bubble, says he plans to invest in another digital coin,” CNBC, June 30, 2017.)

However, investors might want to take a closer look at Unikrn, because its business model is trickier than it seems. Unlike existing betting platforms, Unikrn will only accept wagers that are denominated in its own digital currency. Hence the ICO instead of an IPO.

Some people are pointing out Cuban’s hypocrisy in supporting this firm.

Here’s what he Tweeted last year:

mark cuban tweet

That kind of skepticism fits Cuban’s brand of “hard-nosed investor.” But real hard-nosed investors don’t steer clear of money-making opportunities, so I’m not surprised to see him singing a different tune these days.

While answering questions about his upcoming ICO, Cuban said “I want to learn more about them. I haven’t signed the paperwork yet. But it’s likely it will happen.” (Source: Ibid.)

It’s as if Cuban claims to hate tacos, but then we spot him leaving a Mexican restaurant. Something seems off here. Either he wasn’t completely truthful to begin with, or he’s started to see the light.

Read MoreBitcoin Basics: Everything You Need to Know About the Digital Currency

I’m going to give him the benefit of the doubt (for now). It’s obvious he doesn’t know much about blockchain, because his earlier comments lacked nuance. So maybe he genuinely evolved on the issue.

Mark Cuban ICO Investment into Blockchain Technology

Is Mark Cuban’s presence a good thing or a bad thing?

We can laugh at his hypocrisy all we want, but it doesn’t add any change to our pockets. He is still a billionaire, and we are still not. So let’s look at the pros and cons to Cuban’s potential investment in Unikrn.

Pros

Of course, the Unikrn eSports ICO is lucky to have Mark Cuban on the prospectus.

First off, he’s a judge on Shark Tank, making him more of a celebrity billionaire than a regular billionaire. But he’s also an existing investor in the company. He’s given Unikrn money before.

In other words, Cuban is doubling down on his bet. Second- and third-round investors like to see earlier investors remain bullish on the company’s outlook. It shows acceleration, rather than the opposite.

Cons

We haven’t seen any details on the ICO. Mark Cuban didn’t become a billionaire by being a nice guy, so maybe he’s hopping on the ICO in order to raise a lot of money very quickly. Or maybe he wants to raise money without a ton of oversight.

Since ICOs are largely unregulated; they aren’t bound by the reporting requirements that force public companies to issue 10-Qs and 10-Ks. We have no idea what they’re up to after they take our funding, which is dangerous for obvious reasons.

Many ICOs are also a way for companies to raise money before establishing proof-of-concept. It is basically the equivalent of startup funding, in which investors have to trust the shadow of possibility that companies can achieve their goals.

You have to ignore the absence of a working prototype or positive cash flow. They are simply not a part of ICOs. Not yet, at least.

Conclusion: How Risky Are ICOs?

The flipside is best summarized by “no risk, no reward.”

It’s a tired phrase, but the correlation between danger and fortune is well-established. Markets reward courage specifically because courage is not normally distributed among investors.

It is by nature a tail-end characteristic, meaning that you’ll end up wealthy or washed up.

That said, the Unikrn eSports ICO isn’t the worst idea I’ve ever heard. At least there is a purpose for the native currency and for blockchain. Both could theoretically improve the efficiency of a betting platform.