Earnings call: FRMO Corp discusses strategic crypto growth and public offering

FRMO Corp (Ticker: FRMO) held an earnings call where CEO Murray Stahl discussed the company's financial health, strategic investments in cryptocurrency and commodities, and plans for a public offering. Stahl highlighted FRMO's highest stockholders' equity at $219.4 million and total assets of $388 million. The company is building a crypto business, focusing on mining rather than holding Bitcoin, with investments in Winland, Consensus Mining, and digital mining assets. Stahl also discussed the anticipated merger with Horizon Kinetics and the potential impact on FRMO's financial statements.

Key Takeaways

• FRMO Corp reported strong financials with stockholders' equity at $219.4 million and total assets at $388 million.
• The company is transitioning to a cryptocurrency mining business, with strategic investments in various crypto assets.
• FRMO's increased holdings in Texas Pacific Land (NYSE:TPL) Corp reflect confidence in the commodities business.
• The company is planning to go public, with a reverse merger expected to be completed in July.
• FRMO's investment strategy includes ordering mining equipment for delivery in August 2024 to secure lower costs.

Company Outlook

• FRMO is gradually building a crypto business, with a focus on mining and strategic flexibility.
• The company's increased holdings in Texas Pacific Land Corp signify a positive outlook on the commodities market.
• FRMO's evolution to an operating company is ongoing and not yet fully appreciated by the market.

Bearish Highlights

• There is a dispute over capital charges, but it is expected to be resolved.
• The company avoided investing in coal-related equities due to government hostility toward the industry.
• FRMO did not use its cash balance to buy a majority stake in Winland during the 2022 crypto winter.

Bullish Highlights

• FRMO holds a small amount of Bitcoin Cash, which is expected to appreciate significantly.
• The company has confidence in the resolution of disputes surrounding Permian Basin Trust.
• FRMO's marketable securities provide insurance against contingencies.

Misses

• FRMO's stock price does not currently reflect the growth in crypto assets, but this is expected to improve over time.
• A $10,000 dispute, while not material to the company, indicates challenges that were significant in the past.

Q&A Highlights

• The company clarified that Matthew Houk initially bought shares of Winland for himself, and FRMO later purchased a block of shares.
• FRMO has not considered using debt to finance cryptocurrency purchases due to the associated risks.
• The impact of interest rates on securities exchanges and trading is seen as providing opportunities regardless of the rate environment.

FRMO Corp is positioning itself strategically within the cryptocurrency and commodities markets while preparing for a public offering. The company's financial strength and strategic investments, coupled with its cautious approach to managing assets, reflect a measured approach to growth and risk management. As FRMO evolves into an operating company and navigates the complexities of the market, it remains focused on long-term value creation for its shareholders.

InvestingPro Insights

In light of FRMO Corp's recent earnings call and strategic focus on cryptocurrency mining and commodities, key financial metrics from InvestingPro provide a deeper understanding of the company's current market position. As of the last twelve months as of Q2 2024, FRMO's market capitalization stands at approximately $320.49 million, reflecting the market's valuation of the company. Despite the strategic investments and focus on growth, FRMO has not been profitable over the last twelve months, indicating potential challenges in achieving financial success in its new ventures.

InvestingPro Data indicates that FRMO's P/E (Price-to-Earnings) Ratio is currently at -17.88, suggesting that the company is not generating earnings to support its share price. The PEG (Price/Earnings to Growth) Ratio of 0.13, however, may point to the market's expectation of future growth. Additionally, the company's Price to Book value is 1.55, which could signal that the stock is reasonably valued in terms of its assets.

InvestingPro Tips highlight that FRMO's liquid assets exceed its short term obligations, which may provide some financial stability and flexibility. However, it's important to note that FRMO does not pay a dividend, which could be a consideration for income-focused investors.

For investors seeking more detailed analysis and additional insights, InvestingPro offers further tips on FRMO, which can be accessed through the InvestingPro platform. There are currently three additional InvestingPro Tips available for FRMO, which could provide valuable information for making more informed investment decisions. To explore these insights and benefit from the full range of features, readers can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.

Full transcript - Frmo Corp (FRMO) Q3 2024:

Therese Byars: Good afternoon, everyone. This is Therese Byars speaking and I'm the Corporate Secretary of FRMO Corp. Thank you for joining us on this call. The statements made on this call apply only as of today. The information on this call should not be construed to be a recommendation to purchase or sell any particular security or investment fund. The opinions referenced on this call today are not intended to be a forecast of future events or a guarantee of future results. It should not be assumed that any of the security transactions referenced today have been or will prove to be profitable or that future investment decisions will be profitable or will equal or exceed the past performance of the investments. For additional information, you may visit the FRMO Corp website at www.frmocorp.com. Today's discussion will be led by Murray Stahl, Chairman and Chief Executive Officer, and Steven Bregman, President and Chief Financial Officer. They will review key points related to the fiscal 2024 third quarter earnings. And now I'll turn the discussion over to Mr. Stahl.

Murray Stahl: Okay. Thank you, Therese, and thank you everybody for joining us. I'll just start off. I'll just make a couple of highlight points about our financials, which I think you'll find interesting. And then I'm going to answer some questions I always get, but I never get them in real time online. Now I only get them as I encounter people. And they ask them then it's too bad because the answer only goes to one person. I really think I should share it with everyone, so that's what I'm going to do. So as far as financial statements go, I believe, if I'm not mistaken, that our stockholders' equity attributable to the company of $219.4 million is the highest we have ever had. And our total assets, which is total liabilities and stockholders' equity of $388 million, I think that's about as high as we ever had. So it's getting to be big sums of money. But what it these financial statements don't do is they don't show you detail behind them. So an important detail and I'll get to some questions about that detail momentarily. An important detail is that we're actually building a crypto business, and we're on the way to becoming a crypto operating company. So the components of that are, we now own 1,655,000 shares of Winland, and I think that's something like 35% of the shares. We keep filing 10b5 plans, and we have one on right now, which is in a quiet period. And I think May 1st, it recommences. So Winland is now largely a crypto minor. We also have a smaller investment in Consensus Mining. Consensus Mining, if everything goes right in a few months is actually going to have a listing, and that's also a crypto mining company. We also -- if you look at our balance sheet, you'll see about $1.3 million of digital mining assets. So we actually mine for ourselves. And put it all together, it would not be a small cryptocurrency mining company, if it weren't diffused into three different pockets. And -- but the three elements are generally speaking, getting bigger gradually. We also have, as you can see from our cryptocurrency holding summary, we have a fair amount of cryptocurrency holdings either directly or indirectly, some in ETFs and some directly. So I'll just speak about what we've been doing in these things and what we've not been doing in these things. So the crypto has been, I dare say, pretty successful. So one question, which I get, and it will require a little bit of a lengthy answer is, the balance sheet cash, which is $38.8 million. Why do you need as people frequently ask, but never on this call. Why do you need $38 million of cash seems to be always around that amount. Why not take the bulk of that and put it into Bitcoin. And that requires a little bit of explanation. We don't want to be a Bitcoin holding company. We want to be a cryptocurrency mining company. And that's an important distinction. Let's start with this. If we were to put the $38 million into one of the various ETFs that have been improved since the last -- these meetings. This is what happens to, in long run, to a cryptocurrency ETF. Cryptocurrency produces no interest, no dividends. The fees are small, but they are fees. So the fees can only be paid by selling a little bit of crypto. So what happened is even that the fund gets a lot of money, the fund that we've traded in net asset value. The number of crypto coins per share or per unit, if you prefer, is always going to go down. Salient distinction, but not the only distinction with the cryptocurrency mining company is. If you do it right, the crypto per share is going up. So you're producing crypto. And there are some very interesting performance aspects as well. So it's theoretically possible in a year, cryptocurrency can actually go down by 20%, but you might have mined 10% more coins. And if those are indeed the numbers, you are an equilibrium. So crypto has a different risk reward pattern than your typical ETF. But the more salient point is, of course, that you're going to be producing more crypto. You're organically growing your net asset value, your net asset value. So if you can continue to organically grow your net asset value and you do it with regularity, you're likely to trade at a premium to book value or premium to net asset value, which is a lot better than just trading at a net asset value level. So it's a very different outcome for shareholders. Another aspect, which you might find interesting. Winland and Consensus don't nearly mine Bitcoin. Winland and Consensus are mining Bitcoin, Litecoin and Bitcoin Cash. And also, anyone who mines Litecoin is also mining Dogecoin. Why is anyone who mines Litecoin mining Dogecoin because Litecoin is a merged mine coin. And as a merged mine coin, for the same electricity, you're mining two coins instead of one. So you could, for example, take the Dogecoin, which is what we've chosen to do, pay all the expenses of mining and keep Litecoin, and it's very profitable. But the profit of mining is not the only dimension of that, which means daily operational profit. The idea is, it's theoretically possible. And before I say it, let me just point out that I'm probably the only person who even believes this. The lesser coins, in my humble opinion, have potentially more upside than Bitcoin, which I think has a lot of upside. The reason it might have more upside is because the size of the other networks are very small. So for example, the Bitcoin network is now over 600 exahash. An exahash, by the way, is one followed by 18 zeroes, so it's a big number. In ordinary parlance, you'd say, quintillion. Litecoin, as an example, has in round numbers one petahash network hash rate. So one petahash is one 600,000th meaning that the Bitcoin network is 600,000 times size of Litecoin network, which explains why Bitcoin has a much bigger market capitalization. But if you could get the hash rate to go from one petahash to two petahash, which is a rounding error in Bitcoin, could double the size of the network and probably double the value of the network. Bitcoin Cash has an aggregate network hash rate of about 2.5 exahash. So it's less than 0.5% the size of the Bitcoin network. It's theoretically possible for -- in a whole host of scenarios for processing power to move from Bitcoin to Bitcoin Cash and it has happened, although in the small scale over the last year or two. That small scale, which most people can ignore, would indicate, and it's happened that Bitcoin Cash actually significantly outperformed Bitcoin over last year as an example. It's possible that Bitcoin Cash, which doesn't have a use case right now, might find a use case. Anyway, the network is sufficiently small, although still secure, you could make a case for it. and you can make an excellent performance case for it. So we have that. Now if you're going to build a mining business, you have to build it gradually and slowly. The intention is, you have a lot of cash as they say to me in any event, why not put it to work? Well, here's why not put it to work because you have to assume that every three or four years, your mining equipment is going to be obsolete. Now the estimated use for licensed equipment is actually less than three years. So a lot of it's going to wear out. But if it doesn't wear out, in our case, we've been very lucky. It hasn't worn out. Every four years is a halving. So the common feature behind Bitcoin, Bitcoin Cash and Litecoin is a halving every four years. Halving means that every four years, your block reward is cut in half. That's why they call it a halving. But your cost of mining remains the same. So costs remain the same. Your revenue is cut by 50%. What business could endure that every four years. So what you need to be in position to do is you need to be able to replace your entire network, no less every four years and sometimes even more frequently than that. Now the other side of that is when you replace your network, the equipment you replace your network with is much, much more efficient in its electric power usage and actually in its durability. So you're buying every dollar you spend for equipment buys more processing power or put another way, the cost of one terahash of processing power is constantly falling. So for the same amount of money, that you had bought a Bitcoin miner eight years ago, today, you could probably buy 12, maybe even 14, and they're much better. So if you invest a lot of money in one iteration, you have no way of knowing when there's going to be a technological breakthrough. All you know is that in short order, there will be. So you'll have no capital reserve to replace your equipment. And you see that's actually what's going on in a lot of the mining companies right now. Capital was raised, capital was invested. We are in Bitcoin three days away from the halving. At the current price of Bitcoin, most iterations of equipment are not going to be profitable. Now maybe next three days, the price of Bitcoin goes up and revenue is up. But assuming it's not, those machines had to be turned off. So if you placed orders to be delivered over many future months. By the way, when you do that, it's actually a natural futures curve in equipment purchases. So if you order equipment for August delivery, August 2024, it's actually meaningfully cheaper than if you order equipment for May 2024 delivery and you get a much better deal on it. So you always want to be in that position. So what's going to happen is if the scenario proves to be true that the leading equipment generations over the last three or four years are going to be made effectively obsolete and inoperable by the halving. The modern generation equipment is going to take over. So let's just say there's a having. Your revenue is cut in half, Bitcoin price is unchanged, but if half machines are turned off, the people you were competing with for the block reward, some of them melt away and in the simplistic instance, you'll get twice as much block reward measured in coins as you were getting before, even though the actual block reward itself is less, meaning you'll get proportionately less than actually less. So what will happen is you will be in equilibrium, you may even be in an improved profit position. So you dare not invest a lot of money any one time because if you do that, you've lost all your strategic flexibility. Now the negative thing from a shareholder point of view is it takes a long time to build a cryptocurrency business in that way. But I think if you were to compare, you can't see Consensus yet because it's publicly traded, but you can't see Winland. So you at least have a window on how things work in a gradualistic cryptocurrency mining effort. I dare say it's actually been very, very successful. So I think our holdings are roughly 35% of Winland May 1st, I believe, is the day of the activation and new 10b5 plan, and we'll continue with our policy. So I dare say, in crypto, we're ready for just about any conceivable scenario. So we're staying away from bold moves. All that notwithstanding, we still buy modest amounts of crypto. And were we ever to attain the majority interest of Winland, we would have to consolidate that. And it would improve our crypto holdings. I believe in our cryptocurrency holdings review which I have in front of me. I believe, correct me if I'm wrong, Therese. We're not specifically disclosing Winland or our share of Winland and Consensus cash. Is that correct? Or am I not correct as far as that goes?

Therese Byars: I think that's correct, Murray.

Murray Stahl: Okay. Good. All right. So let's just go to another topic which has been thrilling, at least, is Texas Pacific Land Corp, you might observe that we actually bought more shares of Texas Pacific. There was a dispute and it's resolved for better or real. But at the end of the day, there are incredibly few companies in the world, maybe even none. I only hesitate to say that because I don't know every company in the world, but there are very few companies in the world that have the quality of TPL in any business and especially in commodities. So let me just point out a couple of aspects of that. Most businesses, they'll trade at a certain price earnings ratio, and in a certain sense, it's a little bit of illusion. Why there's a little bit of illusion? I'm making up a number here, but if you bought a business at 12 times earnings. Yes, it's 12 times earnings and its GAAP earnings, but it's not as if you can take the entirety of the earnings if you wish to and disperse it to shareholders. You can't do that. So different companies have different ratios. But in the end of the day, you have to reinvest a goodly portion and in many cases, more than goodly portion of the earnings to maintain the resiliency of the business. Now all you have to do is look at the financial statements in TPL. You'll say the capital expenditures are de minimis. So the earnings, at least in principle, are available to be used for shareholders. In theory, they can buy back stock. In theory, they can make acquisitions. But there are acquisitions that are in there with a view to growing the business or they can just be paid out in for dividends. Very, very few companies have that faculty. Also longevity of the business, because what is the business? It's oil royalties, it's land, which is easements on land, and it's water, both source water and produced water and land is forever. Water is forever. There were no other businesses that have those characteristics. So even commodity-based businesses, so let's make two points. The first point is just regular business. Most businesses either provide a service or make a product? And how many businesses, even the best, I can say they're unchanged after many years, the business changes, competitors arise, the product becomes obsolete, maybe more capitalists be invested to maintain the edge. I think historically, very few companies have maintained the edge over the course of decades. In these kind of businesses, you really don't have to. Now let's turn to commodity companies. Commodity companies, you might not be aware of this, but most commodities have negative real rates of return. So for example, you couldn't do this in reality, but you could certainly do it theoretically. Let's say, you measured wheat. I just wrote something saying published, but one of the facts I put in the paper was the price of wheat in 1866,1867, Department of Agriculture, United States Department of Agriculture, actually maintains records of prices in a planting season because that's the relevant statistics from their point of view. Right after the Civil War, the price of wheat was $2.06 a bushel. On the eve of the First World War, price was considerably less than $1. So people naively say that investing in commodities for a long period of time, they're inflation beneficiaries, well, they're not. Now I could go to the lowest price recorded and last 100-plus years of wheat, which is 1932, 1933, planting year, where the wheat price actually declined, I think, $0.38 a bushel. And can you imagine looking at wheat prices in 1932 or '33 and seeing a price of $0.38 a bushel. And there are people who were alive in 1932, '33, they actually had -- were old enough to have lived through the Civil War. There were even people who actually fought in the Civil War. And they're thinking about inflation, what might have been they are thinking about inflation. And even today, the price of wheat is maybe $5.5 a bushel. So what is the actual rate of return? It's a fraction of the rate of inflation for that time period. Now one of the reasons it's a fraction inflation. I can give you statistics on all the commodities. I won't do it because you'll find it boring, but I think you should look these things up for yourself. So what do producers of commodities, remember, these are capital-intensive commodity companies. What is their number one mission to a) produce more of the substances which, of course, increases the supply and much, much more importantly b) what is b) reduce the cost of extraction of that commodity where it's a gold company, a copper company, whatever. And not -- in most instances, they don't really reduce the cost -- the producing commodity in nominal terms, but they do succeed in reducing it in real terms. So the cost of extraction is usually going down in real terms, and wheat is an example of that. Then the price is not going to advance at a rate commensurate with inflation. Now, you couldn't, in reality have bought wheat in 1866, '67 planting year and kept it because a lot of commodities just don't have unlimited life. As a matter of fact, most commodities don't have unlimited life. So even oil, I guess you could say it has unlimited life, only if it's in the ground. You have to use it if it comes to the surface because the cost of storing it, imagine if they could store oil from 1866, '67 to now. What was the point? The cost of storage basically overwhelmed what the cost of production was. You're not going to make money. So most commodities have negative real rates of return. Land is an exception. Land has a positive real rate of return. The other big exemption is water. Water has a positive rate of return of time because you wouldn't call it storage, but land is land. It's not really being stored in the conventional sense of the word, but it's not going anywhere. Water is the same thing. It's underground unless you bring it to the surface, it doesn't get used at all. But if you do bring to the surface, it has a natural refresh rate. And that's why in the world of inflation beneficiaries or inflation protection, if you prefer, that's why it's so important. That's why we're so enthusiastic about. And we look forward to owning it for a long period of time to come. So to give you an overview of what we're doing. I asked myself a couple of questions that I never seem to get in the real world, which is this forum, but I hope you found that interesting. But now let's go to the real world. I'm sure you have questions, which have been presubmitted. I don't know what they are, and I'd be delighted to answer whatever anyone would like to post to me. So if you will accommodate that, Therese, I'll be glad to answer any questions.

Therese Byars: It's my pleasure. The first question begins. Thanks for all your work and congratulations on the Scott's Liquid Gold transaction. I had a quick Miami International Holdings accounting question. Could you help me understand the change in the MIH direct account balance from the first quarter of 2024 at $4.7 million to the second quarter of 2024 at $7 million and there is more. I understand the investment is held at cost, but I see based on the top five holdings documents that FRMO's shares of MIH increased from 1.821 million in Q1 2024 to 1.824 million in the second quarter of 2024. Even if we conservatively assume all these -- all of that increase in MIH's directly attributable to FRMO's balance sheet versus South LaSalle, the incremental purchase price seems very high versus a $7-ish share valuation given to MIH a few years ago. Was the change in the MIH direct balance due to a contribution from FRMO into MIH? And if so, why? If it was due to direct purchases, can you help me understand where my math above is erroneous, if at all? And Judy actually provided some more information, Judy Yellin, would you like me to read that?

Murray Stahl: Please. Always welcome it.

Therese Byars: She's the fund controller. And -- there is -- this is what she said. There is no difference in the number of MIH shares held directly by FRMO and Fromex from the first quarter to the second quarter. South LaSalle Partners LP did purchase almost 500,000 additional shares in November 2023. And while FRMO's investment in South Lasalle was down about 2% by the end of the second quarter due to additional inflows in South LaSalle by outside investors is still amounts to an extra 3,000 shares owned indirectly. You can see this in the top five files from August 31st, 2023, and November 30th, 2023. Further, the MIH shares are not held at cost. We've been marking them monthly. The price we used for August 31st, 2023, was $7.18 per share. And for November 30th, 2023, we used $10.66. At year-end, we used $10.30 with the help of an outside valuation firm, and we'll continue to use that pricing through March 31st, 2024, when we'll get a new valuation from the outside valuation firm. That's it from Judy.

Murray Stahl: Okay. So basically, I'll add a little color to that. So the funds, South LaSalle, which we're invested in, had the opportunity. Every now and then, somebody, don't forget, MIAX is a private company. And people waiting for an IPO. And every now and then, someone takes position. The IPO has not yet happened. Therefore, the IPO will never happen. I don't necessarily agree with that, but such as the position and the people who actually believe that will offer shares up from time to time at preposterously low prices. So we would be remiss in our duty if we didn't buy them. And the fund raised some money, and we participate in that. But basically, the bulk of the change in value is the increase in value. Now why is there -- how does that value get determined? It has two components to it. First component is we have an independent valuation assessment where just -- it's compared to publicly traded exchanges and it's very conservative, in my view, but such it is. And then the second amount of it is. Every now and then, the company was a private placement. And that is not at the $7 price. So that gets taken into account in the valuation. That's how we arrived at that. So it's actually a pretty good investment for us. I don't know what to value what the price we're using. Don't forget, a lot of our shares came from the merger between, Minneapolis Grain Exchange, which we were a big holder of into MIAX and a lot of them came from the merger of Bermuda Stock Exchange into MIAX, and we were big holders of both of those companies. So I don't remember what valuation we were using way back in a day, but it was considerably beneath the current valuation. And all you really have to do even I know it's a private company, but if you go into MIAX website, you look at the volume, you could see how robust the growth has been and a lot of valuation even though it's not precise, so you can get a real sense of how much advances changes in volume because volume is the most important dynamic of an exchange. So I hope that addresses that. Other questions?

Therese Byars: Yes. Some of the commentary on the issue of noncontrolling interest confuses me and seems a bit contradictory. Perhaps Murray could comment on his thoughts as to how best to value the company, particularly with respect to the net asset value of about $4 a share without noncontrolling and about $8 including noncontrolling. I'm trying to value of the company from my point of view, and in particular, what I would get as a public shareholder, if FRMO were dissolved as of November 30th, 2023 with the proceeds being exactly what is on the balance sheet. If I'm interpreting yours and Murray's comments correctly, I as a public shareholder, would get $4.69, not the $8. Do you agree? If so, that reconciles Murray's comment that the stock is selling for more than book, i.e., $7 plus versus $4.69 or about 160% of book value for the public shareholders? Thanks for humoring my efforts at clarity.

Murray Stahl: Okay. So for clarity purposes, you should never, I repeat, never include the equity that's not attributable to shareholders. So what you would get if we decide to liquidate the company, you're getting the equity attributable to shareholders, $219 million, divided by number of shares outstanding, that's your number. That's what you're getting. The other number doesn't belong to the company. We need, however, to consolidate reason we need to consolidate those accounting rules. There are two funds that have a lot of outside capital, one is HK hard assets one, one is HK hard assets two. The total assets are not small number. I think they gravitate, they change every day, but they gravitate to around $200 million or thereabouts. And of the $200 million only about 1/4 of that, and you can see it in the notes, I think it's Note 1. May not be a quarter, maybe 22% belongs to Horizon Kinetics. But that will be in our shareholders' equity. So $4 and change is the right book value. The reason we trade at premium book value is, we're building a real cryptocurrency business. And I personally think, and it's just subjective, so take it for what it's worth, I'm also biased. It's not a fair valuation in a negative sense, it should be greater because take any of the cryptocurrency mining companies that exist, which are many publicly traded. And I think arguably, our is a lot better, a lot more stable and has much, much less risk to it. And I would argue it's even more successful, that's measurable in terms of our growth in crypto, how much we produce, how much we retain and the fact that we don't need outside capital, which the other companies appear to do, why we trade at a much lower price to book. I don't think it's there, but it is what it is, and there you have it.

Therese Byars: Next question. I recently became aware of FRMO, bought a starter position, and I'm trying to understand the details of the business as time permits. If possible, I would love to get a better understanding of the history of the business and some of the current business nuances. Thank you.

Murray Stahl: Okay. So historically, it really was created by Horizon, not the Horizon Kinetics. So there was a Horizon Asset Management or Kinetics Asset Management. The same shareholders control both groups. But they were separate companies. One was largely management of money for wealthy individuals largely, the other management of money in a mutual fund context. And we started that way because we thought the one business failed, the other business could go on. So we had two separate companies around parallel until and somewhere around 2011 I think it was. Those businesses merged and became one, Horizon Kinetics. In roughly the year 2000, Horizon had accumulated a certain amount of capital. We didn't need it in the business, but we did want to invest it. So our purpose was to find some vehicle where we could be publicly traded because we thought the permanent capital model is a lot better model for investing money than the transitory capital model, which is mutual funds. One of the problems with the transitory capital model is not even the flows, money comes, money coming, money goes. It comes at the worst possible time. So when you get it, you always get it after a big increase in net asset value. And then because markets go up, markets go down. If it goes down, you end up losing the money. When you actually want to buy things. So was basically a vehicle for investing our own money and perhaps raising some permanent capital opportunistically if we had the ability and we actually did at one point a private placement raised a few million dollars of assets a lot just to see if we could do it. And that's the way it was. But then we accumulate so much capital, we didn't want to merely be an investment company. We always thought, we would buy a business, and we'd run our business. And we looked at various things. And everything we looked at, we either didn't like it because it's too time continuing to run or it's too expensive or it didn't have a long enough life for us or we just didn't have the expertise to do it. So it was eight years ago, that we thought about cryptocurrency, and we made a small investment. And the idea was to learn more about the business and see if it could be a viable business and essentially summarizing here, but that's basically what happened. So the next step in our evolution is to make a much bigger operating company out of crypto. One of the interesting things about crypto is you don't need a lot of people in the business. And one of the reasons we didn't really want to be involved in the conventional business, it involved a tremendous amount of people management. Now whether it be detracted from our attention to other managers, might not even have had time to do it properly. So that's, in brief, the history. What's next, Therese?

Steven Bregman: Steven here. I would just add for Dr. Fink. It's not for me to assign anybody homework, but I thought that was an excellent strategic summation, but if somebody were to want a little more flavor and sense of developing strategic shifts over time. The various letters, the annual FRMO letters, which are on the website can give you a lot more interesting if you're interested, that kind of thing, detail and nuance if that's your line of country, it's worth to take a look at.

Therese Byars: Thank you, Steve. Next, any updates on the Horizon Kinetics merger with Scott's Liquid Gold that Murray can share and also what impact will HK becoming a public company affect FRMO and the price of its shares in your opinion. When the dust clears, how many shares and what percent of the shares will HK have and be held by FRMO? What percent of the float in shares, yeah, it's a lot of questions. Okay. Do you want the last one?

Murray Stahl: You might as well.

Therese Byars: Okay. What percent of the public float in shares of the new HK stock would be? And what percent of the outstanding will that be?

Murray Stahl: Okay. So let me just give you some background that you don't know. One of the reasons we -- many reasons for doing this transaction. One of the reasons in this transaction are that when the founding shareholders of Horizon, small shareholder, but nevertheless, a shareholder passed away. So the heirs have no desire to own shares in a private company. So there's only two ways to solve that. The first way is to buy the shares from them. The second way is come public. Now buying the shares from them is problematic because although we can certainly give anyone complete and full disclosure about what the company owns and what its prospects are, et cetera. The valuation assigned to any business is subjective. So we might assign the valuation of X and someone else might assign the valuation of Y. It's a natural conflict. We really didn't want to do that. So we decided the best thing to do is disclose everything to the world, just come public. And if you own shares, you could either sell it or you can buy the shares. Now the float. Horizon is a private company. So none of those shares in the public domain will be in the public main on day one. The only shares in public domain is Scott's Liquid Gold, which is about 2% of the shares. So now -- but you know there are going to be some selling shareholders. I personally am not among them. But look, no one's here forever. And some of the people are getting older. And it's only natural they might want some liquidity. So I can't give you a number other than the 2% number because in round numbers, that's what Scott's Liquid Gold is going to -- that's the float. And I suspect there's going to be some other float. But I can't know the number. I just don't know it, so I can't share it. There's a lot of documentation and this is a reverse merger. So there's a lot of documentation is put together. As preparation for doing it, we actually hired a CFO with public company experience because there's a mountain of work that needs to be done to complete this transaction. And it took a certain amount of time just to find and then hire the CFO with company experience. So we're thinking maybe July transaction we consummated. I don't know that. It's just what I'm told and in a merger of this type. No matter how many things you do, there always seems to be one more thing to do. So I don't know if that deadline will be met. I think it's going to be met. It looks good right now, but you never really know the -- now will it -- how will it affect the FRMO financial statements, it's going to affect FRMO financial statements. Why is it going to affect that? Because I'm going to use number 2%, it's not the exact number. Scott's Liquid Gold has a market capitalization. So I mean if it ends up being 2%, again, it's not exact. I'm just using this for luxury purposes, you got to get the exact number. I'm sure if you called Horizon, you can find somebody who will give you the exact number. But let's say the number is 2%. So they told me the exact number, but I just don't remember to how many decimal points it is, but you should get to the X decimal points. You take the Scott's Liquid Gold market capitalization, let's say, we're 2% for use of computation. So the Scott's Liquid Gold market capitalization is X. You divide it by 0.02, 2%, that will give you market capitalization for the entire thing. FRMO is going to own a little bit less than 5%. Again, I don't know the exact number, but in the footnotes, of the FRMO report, you can find a number. I just don't memorize numbers like that. But in any event, if you now take Scott's Liquid Gold, the market capitalization, divide by 0.02 and multiply by point, I think it's 0.0483 or something or maybe it's 0.049, I don't know, some number like that. So if you did that, you would come up with the value the carrying value that FRMO should have if they marked Horizon to market, which we don't do. And you should do that. And if you do it, you'll see that the balance sheet values will change. It will be material. So I can probably do the number in my head and give it to you, but I told you methodologically, how to do it. So you should do that. And now you'll know the answers to the questions you're posting.

Therese Byars: Okay. What is the intrinsic book value per share? If you adjust for deferred taxes, the fair value of the private businesses, the fair value of the public businesses and the fair value of the crypto holding?

Murray Stahl: Well, the crypto we mark-to-market, the public businesses we mark-to-market. The private businesses, those will be examples of MIAX and the Canadian Securities Exchange did not market valuations. They are just valuations as conservative as they are given by a third-party. Horizon is that way. I just told you how to do valuation I don't know what the IPO value is going to be. Well, I just have to find out. So I can't -- even though I have my suspicion of what it is, but I don't think it would be proper to comment on other than it's going to be a number, obviously. But in the Horizon case, you'll see it's going to be higher. So it's a higher number. In the case of MIAX, you see the value is, it's obviously going to be less important. Arithmetically, that's obvious, from the financial statement, then Horizon is going to be -- and then there's the crypto business. So we don't know what the business of Consensus mining is going to be, but we don't have a lot of shares yet. So that's something to considered, but I don't think the change is going to be material. I just think that cryptocurrency mining businesses that are well managed, which I believe this is trade or should trade at big premiums and asset value. And they all do, even though not all of them are particularly well managed. So that's as far as I can go with giving you what the valuation would be.

Therese Byars: It has become increasingly frustrating watching the world of crypto assets explode to the upside, yet the share price of FRMO Corp has not moved an inch. The last time Bitcoin made a run to 60,000 per coin. The share price of FRMO was trading above $14 per share. Now Bitcoin is at 70,000, and FRMO has not participated at all. What can be done to make sure shareholders are rewarded for their patience? The investments you have made for this company have been fantastic. But ultimately, the company will be judged by share price, not the book value. So do you consider stock buybacks, dividends, a name change and uplisting to try and increase the value?

Murray Stahl: Well. Go ahead and finish if you I may be interested.

Therese Byars: No, no, that's on a different topic in the next part.

Murray Stahl: Okay. Okay. Well, anyway, I believe it's going to get its valuation. None of those things are a problem in FRMO in terms of valuation. The problem is everybody owns FRMO pretty much likes FRMO. So nobody really wants to sell their FRMO. So it's very hard for a new shareholder of substance to get shares. And therefore, you could uplift you can do all sorts of things. You could change the name, you can buy back shares. If you buy back shares, all you're really going to do is make it less liquid. That's not going to help, it's probably going to hurt. So if you really want to get the valuation, it's going to have to be more liquid. And it's going to be more liquid because the same dynamic of Horizon in terms of shareholders needing liquidity it's going to happen in FRMO. Matter of fact, to a very small extent, it's already happened. So in the fullness of time, that will -- the liquidity problem will solve itself and we're going to get the valuation we want. If it doesn't happen the next logical thing to do is do an equity carve-out. So maybe when we have where we're finally -- if we ever get to a position where we consolidate crypto people can see that might do it if we have the right liquidity, then if it doesn't do it, we can do a carve-out, meaning we do an offering to a subsidiary. Let's say, it's crypto subsidiary, make that public, so people can see the value of crypto because right now, there is no individual line item where you could summarize all the crypto. So how do you value Horizons, I mean not Horizon, from those crypto efforts. There's no line item to that. And that's what we're trying to solve. So in the fullness of time, I don't think the fullest time is going to be long. We're going to get to all that stuff.

Therese Byars: Okay. This question is a little off topic of FRMO. He said I know Murray really likes the oil royalty trust positions. One of his larger positions is Permian Basin Trust. It has been hit hard so far this year trading down 50% in the last year. Would you comment on why this is and if you still like this company?

Murray Stahl: Well, I like the company, and there is a dispute. So you may recall when there was a Horizon TPL dispute, although company performed splendidly, the stock went down by 50% when it was dispute. In Permian Basin Trust there's disputes. It's not the same dispute as we had with TPL. The operator is accused by a shareholder, not by the trustee, although on behalf of the shareholders, is accused by a trustee of having too many capital charges that were not legitimate. So the issue is how much cash flow, how much dividend should Permian Basin have. That's going to have to be resolved by the court system. And so what happened in Permian Basin Trust is kind of the same as what happened TPL with, I will say, this the salient distinction. So I dare say this, the -- in TPL, you might not believe this, but yes, we had our dispute, obviously, it was in court, but if you were sitting there in the Board meeting, you'll be amazed how remarkably cordial the proceedings really were. And the reason was is because we had dispute. It wasn't a monetary dispute. But more to the point, we agreed on over 99% of the issues. So this is not that kind of dispute and it's going to be resolved in any way. So it's going to have to be clarified. And it will get clarified in due course. So either the -- some shareholders are right and the company just put in too many capital charges or they're wrong but we're going to get the right number. We're going to find out. So I personally wouldn't worry about it very much. Just like during the dispute, you couldn't see it. You know it's my perspective, of course, but everybody is working together, I would say, pretty productively. Might have had our odd moment when we'd expressed disagreement on certain topic that we all know what that was. But other than that, it's pretty pleasant being there. That you wouldn't imagine that was the case. But it really was. This is maybe going to be a little more profound in the case of Permian Basin Trust, but it will resolve itself in due course. So I am not worried about it whatsoever. And we were buying more shares of Texas Pacific as any we can see from our filings during the controversy, and we're buying more shares of Permian Basin Trust in the place where it needs to be bought.

Therese Byars: My question is for both Mr. Stahl and Mr. Bregman, is what is one thing each of you believe FRMO shareholders either don't understand or appreciate about FRMO?

Murray Stahl: All right. So I'll do first I don't think the evolution of FRMO to an operating company is appreciated because it's taken so long necessarily. So as I indicated earlier, but that's the only thing I would say that's important. I'll let Steve, you can give your appraisal.

Steven Bregman: Well, there are actually many, and I think they mirror the differences between the management and because of the management, the structural and strategic philosophy and implementation of FRMO Corp versus the typical operating company, which is what investors are accustomed to because why shouldn't they be accustomed to it. So I'll name a couple even. So for instance, cash. So there's an awful lot of cash and effectively cash and marketable securities on the FRMO balance sheet. And I'm sure pretty much everyone on the call, anybody who follows small value oriented companies realizes that a business doesn't get any kind of valuation multiple on cash. Even though in a sense of cash is the most basic valuable thing you can own during difficult times or in times when it can be an opportunity. In fact, sometimes companies sell at a discount to their cash or the cash is discounted on the balance sheet in terms of its public market value. And yet, there's this thing that happens that you can have a company that on the last day of a certain month, owns a bunch of cash on the balance sheet. And in the first day of the next month, that cash has been invested in something, some asset. It doesn't matter what you call it. Call it, you know, a big office building or some real estate property or something else or a different company. And all of a sudden, people will apply some multiple, maybe a big multiple of that cash that's now in the form of the new assets that's been purchased that can happen overnight. As Murray has already described, there are more elements of businesses within Horizon Kinetics and FRMO Corp that are on their way to becoming public. And you get the highest multiple for any business in the public markets. And Horizon Kinetics will have its some form of public valuation and that will get us more eyeballs and legitimacy and so forth and so on. And I'd like to mention, it's interesting that the questions we're getting today for this particular conference call. There are many more participants in it than we've had before. New names I don't recognize and the breadth of questions are greater. And if that's any kind of indicator of the earliest dawn, the early light of additional interest between Scott's Liquid Gold and some of the other businesses that are pending relative to the public markets, then we're heading in the right direction as far as valuation goes.

Therese Byars: Okay. I have been told that nodes have more control over the Bitcoin blockchain than miners, is that true? Does FRMO or any associated companies like Horizon Kinetics or TMST up or run nodes. Could they explain the difference, please?

Murray Stahl: Okay. To begin with, we don't run any nodes. But nobody runs -- nobody has control over the blockchain. No miner has control over blockchain. No node has control over blockchain. The miners provide a service of validation of transactions. Nodes are just aggregations and miners that enables miners to communicate with one another. That's it. There's nothing mystical about it. The whole idea behind Bitcoin is, it's decentralized. Nobody is supposed to have control over it. Because every time somebody gets control over monetary system, you see what happens. It gets abused. So but it's very hard for people to think about that because it's totally outside of your experience. So let's use this as an example. We, living today in our lifetime, we don't know anything other than the central bank system of fiat money. We never experienced anything else. Now you could say we in FRMO, we experienced something else. But very few people experience something like that. They look at the price of Bitcoin. And even that is the wrong way of looking at life. You see they're looking at Bitcoin as if it's some kind of stock. It's quoted. Bitcoin is trading at x, but that's not true. Bitcoin is not an asset in that sense. Its value is relative to the fiat currency, you'll say, well, Bitcoin went up so much percent over the course of its life, not true. So dollar lost value in relation to Bitcoin. If we were priced that way so instead of Bitcoin going up x percent, if someone said the dollar lost x percent in relation to Bitcoin, people would say, my God, my dollars are losing value in relation to Bitcoin. Everybody would then try to buy Bitcoin. They just think it's a stock. So they don't really know what it is yet. So no one has control over the blockchain. There's not going to be any shortage of Bitcoin no matter how high it goes. Because and I'm going to confuse people by saying it, but it's nothing other than the truth, and maybe you can ask a follow-up question, and I'll clarify it. If there ever was such a thing as a shortage of Bitcoin, you can always fork the Bitcoin Network, anybody can do it. I can do it myself if I wanted to. I could change the properties of Bitcoin, I could make them the same, I could tweak it. I could do whatever I want to do. It hasn't been forked.And people are going to use to fork, they're not going use to fork. So nobody is controlling of anything in Bitcoin. That's the virtue of it because nobody can gain the system. Nobody has the power to manipulate the interest rates, nobody has power to manipulate the money supply. The issuance goes in accordance with a predetermined protocol and that's the way the system works. So it's really very simple.

Therese Byars: Would you, here are some questions. There is -- what are your insights on mining Bitcoin rather than directly purchasing Bitcoin as well as Bitcoin Cash will be appreciated. It goes on, FRMO has pursued a Bitcoin mining strategy for several years. On prior conference calls, you have listed the many challenges that Bitcoin miners face, i.e. periodic reduction of block rewards, obsolescence of rigs, increasing hash rate and electricity costs, et cetera, and the needed skills to navigate these challenges. It appears to me that the returns from buying Bitcoin to US dollars have outperformed purchasing the publicly listed miners for most time periods. FRMO has $38,822,891 in cash and cash equivalents as on February 29th, 2024. Why does it not dollar cost average purchasing Bitcoin as part of its cash management strategy since the purchasing power of the US dollar is being diminished by inflation? And there's a couple of more, but I think I'll stop there.

Murray Stahl: Okay. Let's answer this first. Let's just answer this one then we'll get the other ones because it would be a cardinal error. Because the purpose of the money is not to protect against the basement. You might say it is being debased by inflation, you might be right about that. But in the world of cryptocurrency mining equipment, the person power of dollar is going up. So it's there as an insurance policy. If the public trade miners get in trouble as it might happen, maybe we could buy a certain asset, that's really cheap that we want. So put it this way, you don't get a return on insurance. Insurance protects you against certain contingencies that you hope will never happen. Usually, it don't happen. So is that a bad use in capital. If you spend money on insurance, I would look at it this way. It's there to provide for certain contingences. There will be opportunities at some point, we might use some rollback that cash. We might not, depends on what happens. But the purpose is not to maximize the return that way because you're never going to maximize return that way. We're fully invested if you -- it's not a portfolio. It's a corporation. It's got to have a certain organic rate of return. So in a corporation, lots of corporations traded at big premiums to book value, and they have cash. In a portfolio, you really don't want to have any cash other than transactional balances, but it's not a portfolio. It's a living, breathing, growing corporation. It's just not apparent to people that it is. And that answers incidentally a question that was posed before why it doesn't have a higher valuation well because the question is, is it a portfolio? Is it an operating company? If it's a portfolio, so we did that and we took the cash and we put it all into Bitcoin, let's say, or maybe left a few dollars. I guarantee you, in my personal opinion, we trade at a lower and a higher valuation. Because there's no -- we gave away optionality, can't do that and expect to trade your premiums and asset value. So I think that addresses that. I hope addresses that so why don't you read the rest of it.

Therese Byars: Also it appears that MicroStrategy's practice of issuing convertible debt at low interest rates has worked well for the company and the purchases of its debt. Have you considered doing something similar?

Murray Stahl: No, I have not considered doing something similar, and I don't have any intention of doing anything similar. And that policy is not without its risks. So you never know what's going to happen to a crypto currency. The whole project could still fail. It's possible. So if it fails, the last thing you want to do is have debt against your major asset, which is crypto. So debt and crypto do not mix very well. And the stock exchanges are littered with the casualties of companies that decided to use debt capital to finance cryptocurrency purchases. In this particular case, it's been successful, but many people tried that strategy, and I won't list the names, but they're in public domain, didn't work out that well. Could have worked out well, but it just didn't. Remember, when you take on debt, debt has to be paid on time and you lose your strategic flexibility. So just a risk, I don't feel like taking. I don't think we need to. So we have it. So what's the next question?

Therese Byars: Okay. The next part of that one. On prior conference calls, you have mentioned that Bitcoin Cash could potentially appreciate much more than Bitcoin due to its similar monetary policy, but lower cost per point. As of February 29th, 2024, 6.71 Bitcoin Cash are held by FRMO and 0.33 Bitcoin Cash are held indirectly. This amount is around US$2,200. So I'm curious as to why it has not been invested why it has not invested a larger de minimis amount into this coin given its potential appreciation.

Murray Stahl: Well, because you don't need to basically. If it works, you only have a small number of shares. You can buy it instantly before you go on. In my point, the amount, let's say, Bitcoin Cash held directly -- held indirectly to private -- public and private company use 62,017 held directly 2,382. And those are Bitcoin Cash Investment Trust. And we have some Bitcoin Cash shares Bitcoin Cash coins itself, the numbers we read correctly, 6.74, 0.33, respectively. Those numbers are going to change and go up. As of February 29th, we hadn't yet mined a lot of Bitcoin Cash in Winland. And given our holdings in Winland, I think, in due course, you're going to see a lot more Bitcoin Cash. So basically, if it goes up, it's going up by a staggering amount. So you don't need a lot. All you need to have is enough to make an impression. So you look at the cost basis of GBTC, Grayscale Bitcoin Investment Trust, you can't see it in this. But we made a small investment. Now it's just a tremendous value. You don't need a big investment. You have to have just enough investment that if it works, you're going to make a favorable impression upon the net asset value. And if it doesn't work, you're going to live to fight another day. That's the philosophy. So what's the next question?

Therese Byars: Okay. Given FRMO and Horizon Kinetics thesis of investing in under-invested hard assets. Why have investments in coal-related equities been avoided? More specifically, what are your thoughts on the investment merits of the asset-light coal-related partnership Natural Resource Partners, NRP?

Murray Stahl: Okay. We haven't invested anything in coal. And the only one reason for that, I don't think coal is going away. However, usage of coal in the United States, it is declining. But more importantly than that, the government is extremely hostile to coal. So we just don't want to invest in a business that the government is really hostile towards. And as far as I can tell, they're going to be even more hostile towards. So we have other things to do with our money. I don't think they're going to be able to make coal in the United States in the foreseeable future, maybe not ever. And by the way, according to International Energy Agency, globally, 2023 was the record year for coal consumption worldwide. So but it's a fight that we just don't want to be part of. That's the only reason for not investing in it.

Therese Byars: Looking at the latest reports from Winland Holdings they mined 56 Bitcoin in 2021, 71 Bitcoin in 2022 and only an additional net of 75 Bitcoin in 2023 due to selling of units in that year. Given management's past comments on the benefits of an operating Bitcoin miner that banks of Bitcoin earnings and accrues that to its balance sheet versus spot ETFs that most ultimately sell portions of their holdings. Why did Winland, which has been effectively run by Horizon Kinetics sell the majority of the Bitcoin in mind in 2023, which ultimately resulted in realized losses on sales of Bitcoin per Winland's most recent annual report, Note 17. How should investors think about the rate of accumulation of Bitcoin at Winland?

Murray Stahl: Well, there was -- the rate of accumulation reduced because the equipment was starting to get old. And the only way you can remedy that is machines went out offline and you got to pay the electric bill. The electric bill is big. So and we need money to buy new machines, we got to replace equipment cycle. So the major asset we have is that. So money has come from somewhere. So we're going through an equipment cycle. We managed to grow the number of coins, it just isn't grow at historical rates because we're still going through equipment cycle. And I think you'll see in the next couple of months, you'll see we've navigate successfully. We didn't issue shares, well, actually, we did issue shares to FRMO, but it certainly wasn't a big amount. So just going gradually and increasing our Bitcoin holdings. And also, don't forget, another factor is we moved machines from Bitcoin to Bitcoin Cash. So we have less machines working on Bitcoin. And another factor is in our replacement equipment, we had mined Litecoin before. We spent some money on buying Litecoin equipment which we could have bought Bitcoin equipment to keep the rate as high as it was before. But Litecoin is more profitable, they want to diversify.

Therese Byars: In the past, management has mentioned that one of the main benefits of an asset-light hard asset company is the ability to invest countercyclical versus the wider industry that the asset-light hard asset company may be a part of. Perhaps I'm mistaken on this, but FRMO did not appear to make significant investments during the 2020 COVID market shocks or in the 2022 crypto winter despite the company's strong balance sheet. In 2020, management commented in a quarterly meeting that they did not see any opportunities to buy a whole operating business, yet Winland appears to be the target for that purpose and has been in FRMO's portfolio since around 2015. Why didn't FRMO use its large cash balance in the depth of the 2022 crypto winter to finish buying out a majority of stake in Winland? It does not appear as it's doing. So would it have been a mutually exclusive or contradictory decision to FRMO's step-wise strategy in buying new mining equipment? What kind of event would spur management into using the cash balance of the company, if not a global economic shutdown on our 2008 moment in the cryptal industry? It should have seemed that buying up the rest of the targeted 51% stake in Winland would have been only a small portion of FRMO's cash balance during the recent crypto winter? That's the end of that question.

Murray Stahl: Well the most recent crypto winter was about the fact that other people were buying -- were issuing shares just right before the crypto winter. What cost crypto winter is a lot of companies issued shares and bought a lot of cryptocurrency mining equipment. That equipment appreciate in value. Sixfold, meaning the price at which you could have bought a machine right before the crypto winter. And then on the eve of the crypto winter, the price machine went up, I think, from $2,000 to leading model was in to $12,000. At one point, you even got to $14,000. So, yes, it was going down because the machines were being marked down. So to buy the machines during the crypto winter would be to take machines that are destined obsolescence, who we'd have to value the shares with the machines at their then market values. Shares that we knew in a couple of years, machines we knew it in a couple of years are going to be worthless. And we're going to pay $12,000 a machine. I don't think so. So we didn't do it.

Therese Byars: Given the small relative scale of Winland versus FRMO, what is management's goal enrolling FRMO into Winland as an operating business versus doing crypto mining at FRMO itself at a scale commensurate with FRMO size? Winland presently makes up around 2% of FRMO's assets, total assets. How would this ever be of material value to FRMO?

Murray Stahl: Well I'll give you two answers to that. First answer is, there are other shareholders Winland that don't want to sell their shares in exchange for FRMO shares. So we don't control everything. That's number one. And I guess you could say in addition, you say it's 2%. If you go back to the beginning, the first report that FRMO issued to the public, I don't remember the number, there's a small amount of capital on the balance sheet. It's really small. And someone asked me almost the another question was just this. Look at the capital. It's so small. How can they ever grow? Anything material? Well, look at the capital is today and look at the capital is then, and you have the answer to the question. Can't judge it by the percent weight it is right now because if that was true, then the we didn't -- we weren't selling shares to the public. Could have argued you don't have enough capital at the beginning. It was really a very small amount of money. You should raise more capital. So you have money to work with. People raised that point, and we didn't regard it as the right approach. And we didn't do it. I think we're very happy we did it right now.

Steven Bregman: That was $10,000, if I recall properly and $0.00.

Murray Stahl: Something like that. There was something like that. Now $10,000 is a rounding error. When I say a rounding error, I really mean a rounding error, meaning that if it didn't happen, if they ever dispute about $10,000 it's not considered to be in a general company with our assets. $10,000 dispute is not even considered legally to be material. And there was a day when $10,000 was our capital. So when they tell you when you meet with accountant, they tell you $10,000 discrepancy, if you were to find one, we consider to be immaterial. It's actually crazy when you think about it. I know that's the truth, but we don't have $10,000 discrepancies. But we did, and we think about, yes, it was $10,000 at the beginning. How could it not be material? But it isn't. So those are the laws everybody has to abide by. Jeez, what's next, Therese? Is she still there? Are you there? Hello?

Steven Bregman: If not, Murray, I can read the question.

Murray Stahl: Okay. Why don't you read it.

Steven Bregman: In the absence of Therese until she returns.

Murray Stahl: Okay.

Steven Bregman: How does management think about the lack of clawbacks of Bitcoin Cash in the case of fraud and how that hinders adoption. By this, I don't mean the Bitcoin blockchain being hacked, but rather the much more frequent occurrences of people having a Bitcoin seed phrases, addresses private keys and subsequently, their Bitcoin Cash itself stolen from them by tricking them into thinking they are a legitimate entity. Hacking uses personal computers, some other form of trickery or just happening to see them entering their seed phrase on a wallet over their shoulder at a coffee shop. When it comes to adoption despite over 10 years of development, Bitcoin appears to leave little room for error and no consumer protections, which makes it hard to imagine how mainstream Bitcoin adoption would work? Asked another way, suppose one of the US Federal Reserve banks all wanted to publicly hold Bitcoin and asked Horizon Kinetics to advise on how that Bitcoin should be received, stored securely, possibly transferred at later times, how would you advise the banks? How would you advise a household with the lack of clawbacks, every storage mechanism and smart contract is just a bug of bounty reward waiting for someone to discover the code, exploit or social engineering that breaks it?

Murray Stahl: Okay. So that's a good question. So let's just reverse it though to answer it. In order to protect the consumers as suggested, you would have to have Bitcoin some enforcement agency, to be able to call it back, you would have to centralize it. So if because some people would argue, was it a legitimate payment? Or what is it a fraud? And somebody have to determine that. So you basically create a central authority that has the ability to make the rules and enforce them. You've now destroyed Bitcoin. So the way it works in the real world of decentralization is you're -- you have to be careful with your coins. So if you're going to sit in Starbucks (NASDAQ:SBUX), as it suggests in the question, and someone is looking over your shoulder, if they're really looking over your shoulder and they steal your money. I hate to be cool about it, so you're a tough luck. Yes, Therese.

Therese Byars: I'm sorry. This call was dropped on my end. I don't know where I was in this long time.

Murray Stahl: That's okay. Steve just raised the question, and we'll get that. I was in the middle of answering the question. Okay. So the last thing you want to do is create a centralized authority in Bitcoin. Yes, the seed words get stolen. Yes, the private keys get stolen. People are careless and just a myriad of ways. And I hate to be cool about it. It's tough luck. Because the alternative, you're back to centralized authority and now you're giving enormous power to the real rascals. You don't want that. So if you don't want to take the chance, you have two options. You need to be very, very careful with your coins or you can be sloppy with your coins, and you're going to have to accept the consequences. But for one I think speak for virtually everybody in the Bitcoin community, no one's going to go for creating a protection. So let's say, the United States government imposed a rule saying, okay, we're now going to take charge of the system.W ell, what happened, we would fork Bitcoin and if they couldn't fork Bitcoin, they fork Bitcoin Cash or they couldn't do anything. They just -- because everybody knows what protocol is. It'd be a problem. And by the way, the amount of loss of coins through this can be mitigated by just using a reputable custodian like Coinbase (NASDAQ:COIN). You don't have to do any of that stuff on your own. So the market will figure out solutions. If you really want security, there are market solutions. The government is not one of those solutions. It's the worst possible solution. So anyway, if the government tried to impose it, Bitcoin be forked or the protocol would just be rewritten or copied see nobody knows what the hacking mechanism, the antihacking mechanisms are at the big banks. No one knows how many times they get hacked. All we know is they carry a lot of insurance. It happens a hell of a lot more frequently than it ever does in Bitcoin. So if you're worried about it, take your coins move into a place like Coinbase or Fidelity, and now it's their problem and they'll deal with it. So that's the market solution, not the government, in my opinion.

Therese Byars: Could management provide insights into the rationale that could be used for valuation of Texas Pacific Land Trust , the Land Corps, Land Holdings particularly in light of questions around the viability of ongoing and future developments. The surface land seems mostly raw and barren and has limited development potential. Specifically, I have concerns regarding the nominal lease rates such as the cheap per acre per month lease cost per cattle operations and the environmental challenges associated with the region, including limited water resources and sparse population density. How does TPL justify the perceived value creation potential of its extensive land portfolio under these considerations.

Murray Stahl: Okay. So it's not my job to speak for TPL. So I'm going to answer the question the following way. I'm just going to talk about land in general. So a TPL acre, a neighboring rangers' acre, they're pretty much the same. So let's talk about the land in the region. So one of the things that no one ever talks about is they think land is going to be developed because they're going to bring in vast populations to people and build schools and hospitals and all sorts of other things. Not too many acres is that going to happen. So right now, in the Permian Basin produces 8 plus million barrels of oil a day, okay? Good by fracking. So you pump water and some propants, which are chemicals into the land and outcomes oil and gas. The addition to oil and gas, what comes out of ground for every barrel of water you pump down there, it's roughly 5 barrels of oil, which is called, I mean, 5 barrels of water, which is called produced water comes up. What are you going to do with it? You got to put it somewhere. You can't transport it very far. It's too expensive because water is heavy. You can make some efforts to recycle it, and it's done in some cases, but it's a lot of water and it's very expensive. So what they do with this is they dispose of it by pumping it back into the ground. Now to give you an idea of the magnitude of the problem, I say a barrel of oil, very few people know what a barrel oil is, a barrel of oil or a barrel itself a barrel of water. It's 42 gallons. No one knows what a barrel looks like, if we do gallons, everyone knows what gallon looks like. So you take 8 million barrels times 42 million -- 42 barrels per each barrel of oil, multiplied by doing this right, yes. So it's 8 million barrels of oil, 42 gallons in a barrel. So now that's 336 million per day times five. That's 1.68 billion to be gallons of water had to be disposed of each and every day. So the value to land is what's under the land. And the -- there's only a finite amount of land that can be used for that purpose, and we're going to run out of land one day. So the price for injection in produced water keeps going up. It used to be, a couple of years ago, $0.01 a barrel. Now it might be $0.06 a barrel and $0.50 or even $1 a barrel on day is readily conceivable. So if you start figuring in how much, let's say, let's say, an acre of land. And let's say, for a year, I'm making up numbers, just to give you -- show you how huge these aren't real numbers. So let's say you could pump 60,000 barrels of water into the ground every day for a finite period of time. Well, 60,000 barrels of water is in terms of gallons, 2.5 million gallons a day. So if you're getting, let's say, $0.01, well, let's say you're getting $0.10. So that'd be $6,000 a day. So you could do it for 365 days. Maybe they'll do longer. So that's $2,190,000 with no expense associated with just giving somebody right to put water on your property, underground. So let's do it again. It's 60,000 barrels a day, if that's what the number was. It's $0.10 a barrel. $6,000 a day, times 365 days at $2,190,000. They can only do it for a year. The acre of land this has no meaningful assets on it, that acre of land, maybe you could buy it for $500. That's what they valued at. But if only for a year, you get $2,190,000 and you still have the acre surface land is still there. Next thing, easements. Eventually you're going to run out land and go further out? Well, you can't put any more water in that acre, but you got to bring the water somewhere else and somebody has to have a pipeline that traverses your land and you get a lease on that. So the acres you save worth $500 an acre. Well, what do you think they're going to charge somebody for right away. I think it's $500 a year. Even it was that's 100% return on capital. What if it was $10,000 a year? What if have you had 400,000 acres and all you got was an easement, $10,000 a year. Well, it's 400,000 acres of Class B land, $10,000 a year. That's probably even $1,000 a month. See what that is, that's $4 billion would it be cash flow with no expenses against it. This is the after the produced water. So I think those figures I can do other kind of things. I think those figures speak for themselves. People that know about them because the produced water problem only became a big deal a couple of years ago. And numbers have not gotten to the size and the price to dispose the barrels have not gotten to a level where it's a problem. But it's rapidly going in that direction. So that's the value proposition among other things, I would say.

Therese Byars: Okay. In past commentary, management has talked about how low interest rates are essentially anomalous. Why would hire for longer interest rates and harder access to money be good for securities exchanges, equities and futures trading bonds, which are, by and large, traded on March?

Murray Stahl: So that's not really relevant to trading. What's relevant to trading is that somebody has to have the securities and either they like the risk to have or they don't like the risk to have, don't like the risk to have. They have to transact. The value is always trading and changing, and they have position size limits. So they have to adjust them. So whatever interest rates are, there is plenty of room for trading. So if interest rates are higher when the interest rates were low, what do you need bond features for to if they're not going to raise interest rates, you don't need bond futures. They are going to raise interest rates now you need bond features you have to protect against losses. So every scenario you can possibly imagine in the world of security is high interest rates, low interest rates and everything in between is an opportunity to trade. And the trading keeps going up and up and up. But there is more transactions that could be done by the same amount of equipment. That's the story of changes. It's really very simple.

Therese Byars: What are management's thoughts on growing use of NGLs in US feeding refineries in place of crude? And how this affects TPL. Also, what is the mix of TPL's crude versus natural gas production?

Murray Stahl: Okay. So first of all, in TPL. So TPL, there is three things. There is oil, conventional oil conventional natural gas and NGLs. NGLs are natural gas liquids. Natural gas is what's called dry gas. Natural gas liquid is wet gas. So a lot of times, you can either liquefy it, which means lowering temperature or sometimes it comes out of the ground wet. It's already liquefied. So just to define the terms. So if you look at on a barrel equivalent basis, so you can convert all these things on a BTU basis, natural gas, natural gas lipids, oil, of course, to barrel of oil equivalents. You'll see in the TPL financial statements. They state their production in barrel of oil equipment and people think that all they do is produce oil. But really, there's a lot of natural gas liquids and a lot of natural gas. So what's happening is, I introduced a new term here, it's called the gas cut. So in the beginning, many years ago, the gas cut was low. Oil is, so trades at a higher price than natural gas. So natural gas is a very low price and a barrel of oil equivalent. So what's happening is we're running out of high oil cut places to drill going to lower oil cut. So it's going to be harder and harder to get oil. And as a consequence, you have to use more and more natural gas and more and more natural gas liquids, which all things be equal, should lift the price. But TPL because capital expenditures just have these oil royalties, it's going to go on for a very, very long time. In my opinion, well of next century. And even then, a lot of the oil will still be in the ground and with better technology, you can be captured. So I think it's some of the best property on the planet.

Therese Byars: How might the emergence of abundant natural hydrogen reserves impact the viability of investing in traditional hydrocarbon-based energy services. Overall, what are management's thoughts on natural hydrogen as an energy source? And how do you reason about the likely effect from FRMO's oil investments?

Murray Stahl: I don't worry about. It's -- if it happens at all, it's in the vast distant future. And what's going to happen is it's really a question of volume. So could you produce hydrogen|? Sure. Your power motor vehicle hydrogen? Sure. The question is, how much volume are you going to put into a vehicle and you're going to have a more extensive storage network. You have a more extensive pipeline network. Do you really want that? And so the issue with oil is we built the pipelines when there really wasn't an impediment into building pipelines. Land was cheap. Now you want to build pipelines for hydrogens. Well, you got the same problem is building high-speed rail, great idea, but you're going to have to take over land by eminent domain, and it's going to cost a lot of money. And that's be added into the cost of converting your hydrogen economy. And so expensive, not because it's so difficult to design hydrogen fuels. You can't get the infrastructure built. Just like if you want to save on motor vehicles, it's a great idea to have more mass transit, have high-speed rail or just rail. Okay. Wouldn't it be a great idea to build a railroad from San Francisco to San Diego. And the federal government appropriated $60 billion for the purpose. And nothing got built. Reason nothing got built is because you first have the appropriate land to get the right away. And you got to pay market, you even get a government order that the owner has to sell. You would be looking to build a high-speed rail from San Francisco to San Diego. You're talking about $3 trillion. No one is doing it. You'd never recover your investment. That -- those are the impediments. It's the infrastructure necessary, which is never discussed. So I don't worry about stuff like that. Incidentally, while we're on the subject, if I can add something to my remarks same problem with solar, same problem with wind. You have to put the solar panels over a vast area. Okay. So it's going to be have to be in this remote area. You're going to find cheap land. Now you have to build transmission towers and transmission lines to get the energy produced, ignoring the intermittency of it from where it's produced to where you need it, which is where people live in the cities. Okay, try getting that right away. Windmills, same thing, try getting that right away. And I've never seen in the popular press any articles talk about that. And by the by you're not even going to save an oil production either because it's the same concept as making solar panels. So how do you get to silicon to put in the solar panel. You have to get quartz and you have to smelt it to change it from silicon dioxide, which is what quartz is to pure silicon. So you have to raise the temperature to something like 2,300 degrees centigrade. So what do you do? You end up, you end up burning a lot of coal to accommodate that. So you put some solar panels up and never count that. In China, they're burning coal to make the solar panels, which is why the electronic goods are made in China because there, you can do it, say, really saving the environment, I think not. Give you another example, which I just wrote about. Silver, you want solar panels, you got to have silver. That's what goes in solar panel. I think it's something like 32 grams of silver and solar panel, something like that. Well, but you can't expand silver production because to expand silver production, you have to expand gold production because that's where silver is. It's co-located with gold. So but your environmental restrictions on doing more mining because it damages the environment. So when you need the silver to save the environment, but you can't produce the silver because it damages the environment. So that's why we don't -- one of the many reasons we don't have a lot of solar panels and apart from the intermittency problem. You can't get the silver and you can't get the right away for the transmission line without spending unimaginable amounts of money. So we are where we are. So I don't really worry about stuff like that.

Therese Byars: Last question. There appears to be a small reporting difference in FRMO's held Bitcoin between the most recent quarterly report and the less formal FRMO exposure to crypto February 29, 2024, document that was also recently published to the company website. The fiscal year 2024 third quarter report shows that FRMO held 158 units of Bitcoin as of February 29, 2024, all the FRMO exposure to crypto as of that date document reports 155.69 directly held units as of the same date. This may seem like an insignificant this difference, but I'm asking regardless, it's only to get a better understanding of how the company is reporting or measuring these figures. Could management explain what accounts for this difference?

Murray Stahl: Okay. I can't explain what accounts for difference. The reason is I don't personally calculate number. But, Therese, I believe you're in charge of the people who calculate number, so maybe you can explain the difference.

Therese Byars: Thank you for that confidence. I don't feel that my accounting skills are strong enough to account for that difference than I didn't. So I think --

Murray Stahl: So why don't you just dig in. And since we don't have the information right now, rather than just coming extemporaneously, why don't we actually have someone look into that discrepancy? People actually calculate the number and get a report back and rather than speculate on what the differential might be. Obviously, I don't calculate these figures personally. And I don't think anybody would want me to calculate the figures, number one. And number two, if I did calculate the figures, I've been an awful lot of trouble because I'm not supposed to calculating figures like that because I am a conflicted person. So don't let me calculate figures like that. I have to rely on other people. And other people, just like myself, we're not perfect. And if something wrong, we just don't know what it is. So we'll have to figure it out.

Therese Byars: I'm sure that I think the answer is simple, and I believe it's been asked before. So I will get the answer and slip it into the transcript when we -- before we publish it. Okay.

Murray Stahl: Okay. Perfect.

Therese Byars: So that was the last question. So we are at the end of this conference call.

Steven Bregman: I don't think it was, Therese. Unless you skipped it deliberately, I don't think you did. There was a question -- there was a question which has a certain interesting flavor to it. This is the last one. Does Winland CEO, Matthew Houk, a Horizon Kinetics employee, own his stake in the company for himself or beneficially for Horizon Kinetics. In either case, could management give us some color as to how Mr. Houk I'm going to insert my own phraseology -- exactly how did Mr. Houk come to own such a large stake in Winland?

Murray Stahl: Okay. Well, to begin with he bought the shares for himself. And when he bought them, FRMO had no interest in buying any shares in Winland because as Winland was originally and still is, to a small degree, a sensor company, basically make sensors. They measure temperature, humidity, air pressure, air quality, things like that. It's a nice little business, but it's a very competitive business. It's very hard to develop new sensors. It's a limited market, if you can go up against the giants and it's a small company. So I just noticed that some years after he acquired it, and I thought that Winland would be suitable for FRMO, so I approached him. And were there any shares available for sale other than the few hundred shares that trade every day in the stock market. And there were some shares available for sale. Trouble is when the blocks got away from me, somebody else bought it? I have no idea who it was. And I was able to buy block from a pre-existing shareholder. He has held the shares since the beginning.

Steven Bregman: That was his, I'm sorry, that was his first, as I understand his first entrepreneurial foray, and he and one or two other people did what they read about ever since they were young, which is the -- they found that it was an undervalued company with a lot of cash and thought they could improve it. And they went and got themselves on the Board. And at a time, I believe, I remember a conversation. Matt came in to my office and asked me if I would be upset if he be a problem if you engage in such an activity and maybe it might take some of his time and I think Murray is aware of that too. And we just said, no, go by all needs. We're delighted that you want to get engaged and use your skills and test yourself.

Murray Stahl: Yes. So as I recall, it was a couple of years before it caught my attention. So any other questions from anyone?

Therese Byars: Those were the last one.

Murray Stahl: Okay. In that case, it just remains me to thank everybody for listening to us and participating and it's a very thorough and rigorous questioning, which we definitely enjoy. And of course, we're going to reprise this in about 90 days. And in the interim, you think of anything, the courtesy you'd ask right now, please contact us, we'll get you an answer. So until about 90 days, we'll see you again. And I'll just sign off right now and thanks so much for joining the call.

Therese Byars: This ends the conference call. You may now. Steve, did you have something?

Steven Bregman: No. I said goodbye.

Therese Byars: Okay. You may now disconnect.

Murray Stahl: Okay. Thanks, everybody. Bye-bye.

End of Q&A:

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