What to Do About Your MyPoints Balance...

I'm not going to tell you what to do, no. But let me give you some background information, and then I'll share my SUGGESTIONS. From there, make your own judgments based on your own personal tolerance for risk.

An article last week by Associated Press writer Justin Bachman contained some interesting passages:

“'If you hold miles with an airline you’re essentially a creditor, and this is a terrible environment to be a creditor to an airline — especially an unsecured creditor,' notes Jay Sorensen, president of IdeaWorks, a Shorewood, Wis.-based brand consulting company that researches airline and other loyalty programs."

and,

"...You have an asset in which you've invested - with the expectation of a future return - that is now at risk. The best route? Sell - cash in - as much of that asset as you can unload now..." (The full article is here, among other places.)

Now, they're talking specifically about frequent flier miles... but I think it applies to MyPoints as well. Point-holders at MyPoints are creditors, and UNSECURED creditors at that.

Here is a copy of United Airlines' Joint Plan of Reorganization, filed on 9/7/05. Let me warn you, it's 130 pages of legalese. You can pretty much skip the first 37 pages -- they're basically definitions of terms.

It's tedious reading, but if you do a search for "MyPoints.com" you'll see them breaking MyPoints' creditors into different categories, and each category will receive a certain percentage of the total amount they're owed. Page 81 has some discussion on all of UAL's loyalty programs. It says that when the reorg plan becomes effective, it's at UAL's discretion whether to honor all of their loyalty programs (including MyPoints). Which I guess would mean, they could choose not to honor them at all. Not much there we didn't already guess.

Now, if you have some accounting skills, take a look at this (it's an appendix to the reorg plan) -- go on down to page 33 and rotate it clockwise and increase the font size so it's readable. This is United's Hypothetical Liquidation Analysis of MyPoints.com. I see that the estimated unsecured claims is 9.9 BILLION dollars (rubbing my eyes to make sure that number's right) and the amount they plan to pay the unsecured creditors (I'm guessing that would include us point-holders) is... ZERO. ($0.00. Nil. None. Zip.) But hey, if you have 20.9 million dollars lying around, that's about what they're estimating is the liquidation value of their assets minus their liquidation costs. (Hey, I'm no accountant; if I'm mis-reading this, someone, PLEASE correct me!)

But if you want a bargain basement deal, they're valuing their intangible assets at 3.1 million bucks. Now I've got a hunch that THAT asset is...US. Our information. Our email addresses, as well as all the demographics they've collected on us. Now, we've all seen the statistics on how profitable spam can be -- a couple of million bucks for email addresses and demographics (MyPoints proudly claims, in their media kit here, to collect over 400 data points on each member) for 10 MILLION MyPoints members -- worth it? To a lot of organizations, you're darned tootin'.

So, back to the original question -- what to do with your MyPoints? Do I cash out now? Do I wait? Now THIS is my opinion, and you can take it or leave it...and as I said, not being an accountant, I may be misreading the financials. But this is how I see it: United Airlines plans to be out of bankruptcy by February 2006 at the latest. That means, by then they will already have sold MyPoints. Will the new owners fork over the 3 million for the database, or the 21 million for the whole business? It really doesn't matter, because NEITHER projection shows the unsecured creditors (that's the pointholders) getting paid. My suggestions are that A) you cash out now and do not do any more offers or shopping through MyPoints -- remember, there's a pretty lengthy wait time after you complete most offers before the points become available for spending, B) you change your email address on file with MyPoints to a spam address and, C) After receiving your last redemption (assuming you still have time), change your entire profile with MyPoints to something bogus -- fake name, fake age, fake number of kids, fake mailing address... as a precaution should the site be sold to spammers or to some less-than-trustworthy company to fold into their own existing rewards program (not naming any names (coughMEMOLINKcough) ).

And hey, if I'm way off-base with how this plays out... no harm done, right? You did get something for your points, you can always change your profile back, and in the meantime, you probably would have earned more by doing your shopping and offers through MyPoints' competitors (check out my favorites, QuickRewards.net and CreationsRewards.net -- may not be as slick-looking but they offer better shopping rates and better customer service). Another oldie-but-goodie is Ebates, which primarily rewards you for shopping...they give you $5 FREE for signing up and making your first purchase through them!

By the way, just for kicks, here is where I initially reported on this story, in 12/02, and here's a copy of the actual papers filed in court in December 2002 for MyPoints to declare bankruptcy.

Good luck, everybody! I hope you're able to get your points out before WHATEVER happens, happens!