- NEXO token holders have complained after their dividend payouts lost value due to apre-dividend price crash
- Complaints focused on the volatile nature of the NEXO token around dividend time
- Investors have called for the Nexo dividend to be paid in a stablecoin
The dividend paid out to NEXO token holders has been met with anger after the NEXO coin price crashed before the payout. The Nexo dividend, which sees a proportion of the company’s profits paid out to NEXO token holders, was paid out on Saturday, but investors have taken the company to task about the mechanics of the dividend after the NEXO price crashed in advance of the payout.
Nexo Dividend Announcement Falls Flat
Nexo, which offers crypto-backed credit facilities, announced the date of their third dividend payment on August 5, stating that $6.1 million would be handed out to NEXO token holders on August 15, a 154% increase on the last dividend in August 2019. The announcement was made just hours after the dividend snapshot was taken, with token holders due to be paid out NEXO tokens to the dollar value of their holdings at the time of the snapshot:
The moment you’ve all been waiting for!
🎉The 3rd Nexo Dividend is $6,127,981.39! 🎉
— Nexo (@NexoFinance) August 5, 2020
However, the reaction to the announcement was almost entirely negative, with investors complaining about both the payout amount and the discrepancy between the value of the dividend on payment day compared to the date of the dividend snapshot.
NEXO Token Price Action Penalizes Holders
The crux of the complaints centered around the fact that the Nexo dividend is paid out in NEXO tokens, the value of which is hugely volatile around dividend time. The Nexo dividend snapshot is taken in advance of the payout day, where the balances of NEXO token holders are recorded and the dividend amount divided up between them according to their holdings.
The issue is that speculators have traditionally bought up NEXO tokens in the lead up to the snapshot in order to maximize their payout amount (or simply trade based on the news), which artificially raises the NEXO price, causing it to drop when the dividend comes through. The same thing seems to have happened this time round too:
As we can see from the chart, the NEXO token price was valued at $0.128 on June 15, but within a month it jumped to $0.244. It was at $0.255 when the news of the Nexo dividend came out on August 5, after which it immediately plummeted 37%. This fact wasn’t missed by investors:
@NexoFinance decided to take a price of a whopping 0.237$ per token to pay dividends while the price was 0.18$ at the snapshot. Therefore Nexo token holders now receive 38% less dividends than they should. $nexo shamelessly shortchanged all of us tokenholders.
— Rob Nguyen (@robnguyen90) August 15, 2020
Will that effectively be $5m when the dividend is actually paid out, given the NEXO token that is used to pay most dividends will likely have depreciated by 20% or so since the calculations? I hope Nexo does something different vs last year’s dividend to improve this.
— David McNaught (@DavidMc0) August 14, 2020
The most popular solution proposed by the community was payment via a stablecoin so that the dollar value of the Nexo dividend remained the same after the snapshot rather than running the risk of being depreciated by a post-announcement sell off. However, Nexo doesn’t seem inclined to change the way they operate their Nexo dividend, meaning that investors will have to put up with this kind of activity around dividend time for the foreseeable future:
We understand your concern @robnguyen90 but the price at the snapshot is the opening price which is taken at precisely at 00:00 UTC on the 5th of August (not even the highest of the day) just like every other time Nexo has distributed it‘s dividend.
— Nexo (@NexoFinance) August 15, 2020