Inside the APE DAO Liquidation & Potential Opportunities

The recent liquidation of the APE DAO left a lot of questions to be answered. One such question is whether or not this will impact other Ethereum-powered games that have been built on its platform, like CryptoKitties and Etherbots. The answer may lie in differentiating between tokens created by developers vs those generated via an ICO–the legality of which remains unclear.

A large number of NFTs are now for sale as a result of the recent APE DAO liquidation. Premium assets in the DAO’s inventory include 81 Bored Apes Yacht Club, 81 Mutant Ape Yacht Club, and 34 Bored Ape Kennel Club NFTs. I wanted to tell you about how we got to this point, so let’s go back in time a little bit first.

What is the Ape DAO, exactly?

The Ape Dao is a Decentralized Autonomous Organization (DAO) that was created to house Kylo.eth’s Bored Apes. On June 3rd, 2021, he fractionalized 49 Bored Apes and a female CryptoPunk into 1,000,000 APED coins on Niftex. By acquiring APED tokens, anybody might get partial ownership of those tokens. “The whole bundle was priced at 140 ETH, and 50 percent tokens were sold to create 70 ETH, which Kylo then contributed to the DAO as starting money for additional purchases,” according to the DAO.

There has been a price discrepancy between the APED tokens and the value of the underlying portfolio of NFT assets that the APE DAO controls, according to an amazing twitter thread from Montana Wong, who says they are no longer engaged with Ape Dao. The price mismatch data looked like this when the suggestion to liquidate the DAO first arose around 31 January 2022 (this data has not been independently confirmed and is derived from the twitter thread):

Montana Wong contributed to this article.

To take advantage of the price disparity, a user proposed to the DAO that the DAO sell its assets and distribute the money to APED token holders. The voting on this proposition became more contentious, but it finally passed:

On 1/30/2022, 86.66 percent voted to liquidate, while 13.34 percent voted to hold. On January 2, 2022, 65.43 percent of people voted to liquidate, while 34.57 percent voted to hold. The final result was 65.32 percent Liquidate to 34.68 percent Hold on February 2, 2022.

From the Insider’s Point of View

For many individuals, the tale of APE DAO is also a very personal one. I met with a member of the APE DAO who requested anonymity (for the sake of convenience, let’s call this source a guy). In July of 2021, right before Bored Ape’s stratospheric climb, he purchased the APED token.

He and two pals joined the DAO for the first and only time, and it was their first and only DAO experience. He went on to say:

Yuga Labs, I believe, will continue to appreciate in value over time. I enjoyed the community as well, and I figured that with so many BAYC, we could eventually work out some revenue arrangements and trade at a premium while still making money.

He was, however, understanding of the successful vote to dissolve the DAO, since he, too, was in debt:

I was underwater from the pricing of APED to the finish since the discount was so enormous. Despite the fact that NAV had increased. Part of the reason people voted to liquidate was because they couldn’t get out for a reasonable price. It didn’t matter to me since I was focused on the long term.

What Happens Now That Liquidation Has Been Approved?

The DAO then proceeded to commence liquidations on its holdings when the vote to liquidate passed, opting to sell the non-Yuga Labs NFTs first. According to their Discord, a handful of NFTs will be auctioned off shortly, and Apes and premium NFTs will be sold in bundles, maybe grouped by attributes.

So far, all of the auctions have been conducted in APED tokens, and the APED tokens have been destroyed, as shown here and here. In other words, you give DAO APED tokens, get your NFT, and the APED tokens are then burned.

If you want to participate in these auctions, you should know that they are currently being run in a non-traditional manner, using Google forms for bids and Google spreadsheets for asset lists. Do your own research and use great care when communicating with anyone on Discord.

Founder’s Remarks

“There’s a potential that the Yuga Labs NFTs are sold to a buyer/group of purchasers if they come with the proper offer,” Kylo.eth informed me when I spoke with him to confirm some of the crucial points for this report. He also voted against the DAO’s dissolution.

The APED Token May Have Value in and of Itself

The APED token on Uniswap looks to be trading in the $15.00 region as of press time, and valuation data from their Discord, updated on February 6th 2022, suggests the token still has prospective worth (this data has not been independently verified). Image

It’s a tumultuous scenario, which may explain why current swap prices have risen sharply in comparison to a few weeks ago, yet still don’t seem to reflect a totally emptied portfolio. When a firm announces its intention to purchase another company, similar circumstances might arise in the stock market.

Due diligence must be done, the transaction terms must be reviewed by the shareholders of both firms, and then a shareholder vote is often held. Because there is still a chance that the transaction will not close, the public shares will frequently trade for a lower price than the stated purchase price for a period of time.

If the APED token swap prices are any indicator of investor opinion, there is likely some deal risk in this APED token liquidation taking place successfully, and at the levels displayed in the data. If no further auctions are successful, you can anticipate this perceived risk to rise, in my view (and perhaps, the APED token would drop). If the perceived risk decreases, the APED token may grow in value to match the value of its assets.

This isn’t financial advise; I simply thought it was a fascinating situation that was developing!

Please consider following me on Twitter if you like my essay.

 

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