Surprise hostile takeovers and abusive market tactics like naked short selling could soon become a thing of the past.
Blockstation-powered Security Token Offerings (STOs) provide real-time market data to stock issuers, regulators and exchanges.
This unprecedented access to current data can help limit exposure to many business risks that have gone unresolved for decades.
By: Jai Waterman, Chief Enterprise Architect
“Let’s take our company public - it’ll be smooth sailing!”
- No one, ever
On one hand you have the stock exchange: an incredible resource that entrepreneurs can use to raise a lot of capital from a lot of investors in a short amount of time. It comes with some risks, mind you, including wiggle room for bad actors to defraud investors and manipulate stock prices before regulators and issuers can spot the risk and react.
On the other hand you’ve got the blockchain: a new technology literally designed to provide transparent, real-time access to vital information. Any business ecosystem (like capital markets) running on the blockchain could make it possible for its members to detect this kind of activity as it happens, or prevent it entirely.
It all comes down to transparency.
That’s why we’re so excited about applying the blockchain to financial markets in the form of the Blockstation-powered Security Token Offering (STO): a faster, easier, less expensive, and above all safer way to list publicly traded assets on the stock market. When compared to the traditional Initial Public Offering (IPO), STOs minimize the risk of abusive market activities that can occur undetected today.
The result? A safer, more efficient market for everybody.
How STOs minimize market risks
With IPOs, it’s not that the information to recognize insider trading or other illicit activities doesn’t exist. It does. The problem is that the information required to make those determinations is scattered across multiple, disconnected databases owned by stock exchanges, broker-dealers, issuers, and depositories. And their systems don’t talk to one another.
One of the breakthroughs of the Blockstation STO platform is that it provides a real-time portal for each member of the financial ecosystem to share and track vital information on the blockchain as it becomes available, making it possible to minimize if not outright prevent business risks including:
Naked short selling
There’s no hiding on the blockchain - either you own or have the right to sell certain shares, or you don’t. This simple fact removes a lot of the ambiguity we see in the world of IPOs, where bad actors could short sell stock they don’t own and devalue a company’s price, often without the issuer ever knowing.
Blockchain-enabled smart contracts can prevent failed trades by ensuring that the assets to clear and settle a transaction are actually available once the conditions of the trade are met. This simplifies and streamlines clearance while increasing investor confidence and trust that their transactions will go through as expected.
Issuers have real-time access to share activity and certain shareholder information, making it much easier to recognize when one or more parties are amassing shares in preparation for a hostile takeover.
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 STO stock and the blockchain to reduce the cost and risk of listing a publicly traded asset, spurring innovation, driving competition, and creating new investment opportunities on regulated, trusted financial markets everywhere.
Think you might want to conduct an STO for your company or asset?
Are you a regulator, stock exchange or broker interested in learning more about STOs?
Contact us to schedule a workshop: