You need to distinguish between stocks, expiring bonds and perpetual bonds.

In stocks there is no need for the clause. The issuer isn't taking any risk, and he can at any time close down the company, liquidate the assets and distribute the proceeds to shareholders.

For bonds with a specific expiration date, there is also no need for this - the bond is normally bought back at expiration.


For perpetual bonds this is absolutely necessary. Mathematically such a bond pays out forever. But this isn't practical; most such bonds decay over time, and once the value is low enough it makes no sense to continue physically paying tiny coupons forever if the issuer moved on. Even if the bond does not decay, there can be any number of legal, financial, technical or medical issues that could prevent the issuer from continuing to do whatever the bonds were meant to do - not having an out is much more risk than anyone could bear (and with an out it's still very high risk for the issuer, but at least bounded).

So a buyback clause must exist. The only question is how to do it in a way that makes sure that investors don't lose, relative to what they would have gained if the payout did continue indefinitely. For bonds with a given BTC denomination this is easy - just some multiple of the face value (I usually pick 120%, so in the "worst case" investors would gain 20% in addition to coupons already accumulated).

But mining bonds have no fixed BTC value. When I invented them I figured that a multiple of the traded price is appropriate, as this is the most objective BTC-denominated valuation of the bond. And I'll note that I used 120% of 30-days highest price, which virtually guarantees no loss will occur (some later bonds didn't remain faithful to the principles).

Nowadays I don't think traded price is the best choice, and some multiple of the ELE (extrapolated lifetime earnings) is better. I'll use that if I issue a new series of mining bonds, and I hope other issuers will do the same.

But I don't really buy the "create panic and buy back cheap" argument. If the issuer wants to play dirty he can just abandon his obligations regardless of any buyback clause - the clause doesn't help him much with this regard. He will need to cause the traded price to drop by over 20% and sustain this for a month - hard to do that without doing something really nasty. Also, if he does indeed create panic, he can simply buy bonds on the open market when people dump them, without any buyback clause.