The number of companies conducting IPOs is dropping to record lows, minimizing new opportunities for investors around the world.
Blockchain-powered Security Token Offerings (STOs) on the blockchain reduce the cost and effort of listing assets on the stock exchange, increasing accessibility to public listings for issuers and investors everywhere.
STOs are incredibly versatile, able to publicly list not just entire companies but individual assets such as real estate, intellectual property, products, and services.
2019 will see the world’s first STOs hosted on a major national stock exchange, signalling the start of a new era in publicly traded companies.
By: Jai Waterman, Chief Enterprise Architect
When you think of the stock exchange, you probably think of buying shares in companies. And why not? That’s the way it’s been since the 1600s.
That way has its limits though, especially when you consider all the investment opportunities out there. From real estate to art to product launches, there’s always going to be one group of people trying to raise capital and another group trying to supply it.
The trouble is, nobody’s really figured out a way to beat the stock exchange for connecting those two groups. Too bad the stock exchange is only for shares in companies. Right?
Welcome to the world of the Security Token Offering (STO).
It’s time to tokenize financial markets
Why do companies go public? It’s the fastest way to raise capital funds from the widest pool of investors, but unfortunately, the existing system is out of date.
The traditional method of raising funds on the stock exchange, an Initial Public Offering (IPO), involves filing a prospectus that provides details about a public investment offering. It involves a lot of back-and-forth with lawyers, brokers, regulators, and the stock exchange, usually taking months and costing hundreds of thousands of dollars.
And the costs don’t stop there. Maintaining a public listing over time is expensive, with antiquated, paper-based processes for everything from audits, cap table management and dividend payments to shareholder voting.
Many small- and mid-cap companies just can’t afford it, meaning they have to raise capital through a smaller pool of personal contacts and accredited investors. Even if these companies could eventually be in a position to do an IPO, they’re more likely than ever to get acquired first.
As a result, the number of IPOs is lower now than it’s been in decades, freezing millions of everyday investors out of exciting new opportunities.
Anything IPOs can do, tokenization can do better
It’s a bold statement, but true. Let’s look at all of the benefits in turn.
For centuries we’ve had publicly traded companies. With Blockstation STOs, we’re entering the era of publicly traded assets, where companies can list a regulated, fully compliant STO on the stock exchange to raise capital for individual projects like:
individual product launches
the next Hollywood blockbuster
real estate developments
upcoming tours or albums for top artists
In this way, private companies can raise capital funds while remaining private, and public companies can do the same for specific initiatives separately from their core company stock.
It’s a transformative concept.
Blockstation STOs will lead to an explosion of new opportunities for public investors around the world, sparking levels of competition and innovation we haven’t begun to imagine.
Time and cost savings
Blockstation’s STO platform cuts the process of conducting an IPO down to a fraction of the time and cost with features including:
Issuers can create a prospectus through a friendly interface including prompts, drop-down lists and customizable template responses in as little as three days, bringing in their lawyer strictly to review the finished draft.
Centralized Know Your Client (KYC)
One-time entry of KYC data for directors, officers and shareholders.
Representatives from the stock exchange, regulator, and broker-dealer can review the prospectus clause-by-clause and view each other’s progress, a level of collaboration and efficiency that is unheard of with IPOs.
Blockstation STOs make virtually every aspect of administering a public listing faster, less costly, and more efficient:
Issuance of tokens
Live, paperless and transparent - no certificated shares required - with real-time tracking by the issuer, stock exchange, transfer agent, and broker.
Potential to automate and streamline just about every ongoing administrative process including audits, cap table management, voting, preventing market abuse, and issuing dividends, making public listings on the stock exchange more affordable than ever before.
Because the Blockstation platform also enables stock exchanges to trade digital currencies, issuers can accept investments in their STO stock via Bitcoin or Ethereum, increasing the attractiveness, accessibility and liquidity of their token over time.
Real, live STOs are already happening
And Blockstation is at the forefront of this revolution, working with regulated financial institutions and ambitious, innovative issuers to list the world’s first STOs on a major national stock exchange later this year.
We truly believe in the power of STOs to spur innovation, drive competition, and create new investment opportunities on regulated, trusted financial markets. Are you an issuer interested in conducting an STO?
Are you a regulator or stock exchange Interested in learning more about STOs?
The Blockstation team is here to answer any questions you have. Email email@example.com to get started.