Initial public offerings (IPOs) are about to go extinct.
This “old way” of raising capital is slow, expensive, and inefficient.
As Jim Cramer recently said, the IPO process is “broken.”
Put simply, regular investors get shafted by most IPOs. Just look at the recent Airbnb and DoorDash offerings. Airbnb’s shares surged more than 100% from their original offering price. And DoorDash’s stock jumped more than 80% above its offering price.
These IPOs cause investors to buy frantically, due to “fear of missing out” (also known as FOMO). And if they don’t buy, they’re left sitting on the sidelines.
It’s a terrible situation for the average investor. But the IPO process stinks for companies, too. Most can’t undertake the expensive, lengthy process of raising capital via the traditional Wall Street route. It typically costs a company millions in fees… and it can take 7-10 years for the stock to go public, or begin trading to the individual investor.
But individual investors shouldn’t fear. There’s another way to invest in companies that need capital and want to sell some of their shares. This new way is faster and more efficient. And best of all, it gives investors the opportunity to invest in companies early in their growth cycle… rather than years later, when the company is already valued in the billions of dollars.
I’m talking about security token offerings (STO).
Regular readers of Token Tracker are already familiar with STOs. It’s the process Curzio Research founder Frank Curzio used to raise capital for his company. A little over a year after the initial private launch, the Curzio Equity Owners token (CEO) is now publicly traded on the MERJ exchange.
It’s all thanks to blockchain technology, which creates a fast, secure, and transparent record of transactions. This means companies can raise capital more efficiently. It’s also great for investors, since digital securities are available to investors in a fraction of the time an IPO takes. STOs can begin trading to individual investors in less than 2 years.
Swiss bank Sygnum, which calls itself the first digital asset bank, offers crypto services like custody, brokerage services, tokenization, and more. This month, it’s making history by becoming the first bank to tokenize its shares on the blockchain. The tokenization is part of Sygnum’s plan to go public in 2021.
Last month, Sygnum launched Desygnate, a tokenization platform to help other companies turn their shares into digital securities.
Co-founder of Sygnum and CEO of Desygnate, Mathias Imbach, summed up its plan:
“We are excited to be the first bank in the world to tokenize our shares. This is an important milestone towards fulfilling our mission of creating more direct and efficient access to ownership and value. This includes new engagement models with our clients and partners, and ultimately providing liquidity for our trusted shareholders.”
This is a huge step for the security token industry. Sygnum is not only tokenizing its own shares, but will help others across all industries do the same.
The bottom line is this: Investors will soon have more opportunities to invest in early-stage growth companies.
Buckle up… 2021 will be a huge breakthrough for the individual investor.