Most publicly traded companies don’t issue dividends, even though it can increase the attractiveness of their stock to investors.
One reason for this is the high cost and effort required for cap table management through processes and tools available with a legacy Initial Public Offering (IPO).
A new Security Token Offering (STO) / tokenized IPO platform from Blockstation is changing this state of affairs, leveraging the blockchain to simplify and streamline shareholder tracking, dividends accounting, and payments for companies of all sizes. See if your offering qualifies for a Blockstation STO / tokenized IPO
By: Jai Waterman, Chief Enterprise Architect
Dividend-paying stocks are attractive to investors. So why don’t more publicly listed companies offer them?
It’s partly because dividends are rolled up in cap table management, which as I mentioned in a previous blog, is already a costly and time-consuming project. Many companies that would love to issue dividends take one look at the added costs of tracking down shareholders, calculating payments, transferring funds (or worse, printing and mailing checks), add it to what they’re already paying just to keep track of their basic cap table, and say, “No thanks.”
But what if they could run their public offering on the stock exchange using the blockchain?
As it turns out, doing that can make virtually every aspect of conducting a public offering - including dividend payments - faster, easier, and far more cost-effective than what currently exists with legacy Initial public Offerings (IPOs).
Welcome to the world of the Blockstation-powered Security Token Offerings (STO) / tokenized IPO.
Reducing the cost of dividend stocks
With traditional IPOs, the network that connects everybody in the capital markets ecosystem looks a bit like this:
Compare that to a Blockstation STO / tokenized IPO, which acts as a centralized hub to connect those same players on the blockchain...
...and you start to understand why we could be due for an explosion in dividend stocks in the near future.
Issuers can leverage the blockchain to start automating many processes associated with cap table management, including:
Easier, faster access to the shareholder information they need to maintain compliant records for their STO / tokenized IPO stock.
Ready access to share ownership and transaction history simplifies how to calculate dividends payable and create an accurate payment schedule.
Issuers can send payments directly through the blockchain or in cash electronically to eliminate the cost of paper and postage, manual processing, making timely transactions and preventing dividends in arrears.
The record of a security token is immutable and permanently stored on the blockchain, making them much more secure than traditional shares. In the rare scenario where an investor’s access to their funds is compromised (such as loss of their private key), it is a fast and simple process for issuers to cancel the old token and issue a new one in its place.
The dividends of paying dividends
Investors understand that when they buy stock, for the most part their money is locked. Any increase in value exists on paper rather than in their bank account unless they sell.
That’s why dividend stocks are so attractive. Shareholders actually get to see and spend some of the money associated with that stock while they own it. At the same time, paying dividends grants issuers an extra opportunity to demonstrate value to their shareholders, building loyalty and making it easier to raise additional capital in the future.
Blockstation STOs / tokenized IPOs make the prospect of dividend stock much more accessible to issuers, providing them more flexibility when determining how to guide their company’s growth.
Real, live STOs / tokenized IPOs 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 / tokenized IPOs on a major national stock exchange later this year.
We truly believe in the power of STOs / tokenized IPOs to spur innovation, drive competition, and create new investment opportunities on regulated, trusted financial markets. Are you an issuer interested in conducting an STO / tokenized IPO?
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.