Growing Opportunity at the Intersection of Blockchain Technology and Business Strategy
Below are three examples illustrating how blockchain technology facilitates capital formation and asset liquidity, followed by a quick look at the securities tokenization process.
☑ Private REIT Liquidity
· Old Thinking ¯\_(ツ)_/¯ ❝Illiquidity makes private REITs hard to buy and harder to sell in an industry still running on spreadsheets and fax machines.❞
· New Thinking 📈 ❝Asset tokenization transforms REIT shares into security tokens that facilitate paperless trading among LPs. Cap table automation saves time. Broker disintermediation cuts costs. Security tokens can serve as loan collateral for stablecoins and cash liquidity.❞
☑ Early-stage funding ─ Reg D 506(c) STO (Security Token Offering)
•US & foreign issuers can raise any amount from accredited investors.
·Typical raise $500,000 to $2 million
·Low costs for legal fees, audits, investor onboarding
·Multi-year fundraising window
☑ Reg A+ STO (aka ‘tokenized mini-IPO’)
•US & Canadian issuers can raise as much as $50 million from accredited and ‘Main Street’ investors.
·Typical raise $8 million to $15 million
·Significant costs for legal fees, audits, investor onboarding
·1-year fundraising window
The Securities Tokenization Process
➊ A blockchain technology called ‘asset tokenization’ transforms traditional shares into tradeable digital assets called ‘security tokensʼ.
➋ Each security token self-executes investment contracts, adherence to shareholder caps, and lockup period compliance.
➌ Cap table automation simplifies administration of disclosures, consents, distributions, and voting.
➍ Paperless trading among LPs can be authorized case-by-case or allowed more broadly.
➎ ATS listing may open secondary market exposure that mollifies illiquidity discounts.
➏ Well-timed listing on a security token exchange may open price discovery that shores up NAV.