In order for the listed trading price of IHF to track the NAV price per token, there needs to be some form of value distribution to token holders that ties directly to the intrinsic value of Hyperion.
This is done by implementing a token buy-and-burn protocol. Much like a share repurchase in traditional markets, the Hyperion Fund will place buy orders on exchange at the prevailing NAV price per token. This method distributes fair value back to token holders wishing to liquidate their holdings. The accumulated tokens are then removed from the supply, resulting in a realizable NAV price per token.
In the scenario where the IHF token is trading at a discount to NAV at the time the buy-and-burn is implemented, a number of IHF tokens in the order book will be purchased below NAV until the prevailing spot price reaches the NAV price per token. In this case, the buy-and-burn will result in an increased NAV price per token for remaining token holders, subsequent to the purchased tokens being removed from the supply.
The net effect on the Hyperion Fund is that the overall NAV of the Fund will drop in USD terms, however the price per token will remain unchanged due to the token supply dropping alongside the NAV. This allows for equal treatment to token holders who wish to realize their investment, and those who wish to continue holding over a longer period.
Buy-and-burns to date
- The first buy-and-burn process was completed in Q1-20 as a test of the effectiveness of this protocol. This resulted in the purchase of 413,843 IHF tokens. The NAV value of these tokens at the time of purchase was $45,346.00, therefore $20,346.00 worth of additional value was captured by the fund. The transaction is viewable here and the circulating supply has subsequently been updated.
- In the Q1 2020 Report, Invictus Capital announced the second buy-and-burn for the Hyperion Fund. Thanks to the rapid success of Quantfury, the Hyperion Fund received a dividend to the value of $1,249,924. A $100,000 buy-and-burn was conducted after receiving Q1s dividend which resulted in the purchase of 1,102,680 IHF tokens. The accounting value of these tokens at the time of purchase was $182,215.93, therefore $82,215.93 worth of additional value was captured by the fund. The transaction is viewable here and the circulating supply has subsequently been updated.
- A larger sum to the value of $200,000 was allocated to buy-and-burn activity over Q3.
- During the third quarter, a $200,000 buy-and-burn was conducted using a portion of this liquidity, which resulted in the purchase of 1,393,968.81 IHF tokens. The accounting value of these tokens at the time of purchase was $246,010.52, therefore $46,010.52 worth of additional value was captured by the fund and returned to remaining token holders in the form of IHF price appreciation. The burn transaction is viewable here and the circulating supply has subsequently been updated.