(Crowd-)Funding exclusive: Why small investors from most of the Security Token Offerings are excluded

The greatest attention of all Token Sales are currently getting Security Token Offerings (STOs). The securities classified tokens may also be traded outside of the crypto Community as the future of modern IPOs. The only Problem is that there is a lack of projects for small investors. Many projects are only institutional investors. Add to that that only a few projects are really promising. What are the reasons for the start difficulty of IPOs on the Blockchain.

By Sven Wagenknecht
31. May 2019BTC$8.431,00 -3.31%part Facebook Twitter LinkedIn xing mail

That STOs in the future, the traditional stock exchange took Association courses and capital measures is becoming stronger, will hardly be doubted. The advantages are obvious: Among other things, the cost is only a fraction of the common stock or bond issues, the processing and posting is significantly faster and also Companies can get access to the capital market, which was previously reserved for only public companies. Alone, these three reasons should ensure that the model STO will start in the shortest possible time. Currently, there may be some doubt, but why?

retail investors please stay out: (Crowd-)Funding exclusively

in Order to be allowed to retail investors securities, issue, need in Germany of a securities prospectus. Without such a prospectus, it is, with few exceptions, only for institutional investors to invest in the respective companies. The tokenized share or debentures can be in the rule, only investors who qualify as such. A qualification, however, is not bound necessarily to a specific legal Status. Often it is sufficient to be able to invest over 100,000 euros. Who can raise a lot of capital, is no longer regarded as worthy of protection by the legislator and may make investments that are otherwise only reserved for Asset managers, venture capital companies, etc.

But why then not a securities prospectus to create, to enlarge the circle of potential donors and to bring small investors into the boat? The answer is relatively simple: Because it is against the company's interests.

Start-ups and securities prospectuses to fit only partially together

the creation of a securities prospectus is very expensive and can quickly change 50,000 euros or more. The capital raised in the run-up to first, and, secondly, by significant investors funds subsequently re-obtained must be. In addition to the costs, deadlines and bureaucratic administrative processes, which could drag the whole procedure in the length. Just because the block of grove technology and Token are Emission efficient, are not the authorities and lawyers for a long time.

The other is connected to a public IPO, there is a high Communication overhead. This means high marketing costs, and a communication that is tailored to less savvy investors. Just for Start-ups, which are in a very early stage and not much more than an abstract product idea, this is an often unnecessarily high expenses. It lacks the capacity simply to a professional IPO perform.

stock market trading? What Is Stock Market Trading?

just like the majority of joint-stock companies are not traded on a stock exchange, are not traded, the majority of companies with a Security Token on a stock exchange. Not every company, the shares or bonds out there that also has an interest in a stock trade in the open market, where each part can have. If a company is to collect three million euros for the twelve institutional investors, and in turn, corresponding Security tokens out there, how to look a liquid trading? Both the market capitalization and the distribution of Token of the company are too low. Therefore, it is far from a Trade, such as in the DAX.

here, Too, the question of whether or not you make the effort, particularly for young Start-ups, to find a stock market and investors care also for small investors to operate. STOs take for many Start-ups, therefore the function or role of an extended VC-financing. With the IPO, a so-called people's shares such as Deutsche Telekom that has to do only very little.

expectations

Security Token Offerings to adjust the Potential IPOs have to democratize to – no doubt about it. Access restrictions and transaction costs are reduced both for companies and for investors. However, this does not mean that every company has an interest and all of the bureaucratic hurdles of today to disappear tomorrow. That many of the STOs are not open for retail investors, so it is absolutely understandable and, in many cases, economically sensible, in particular, as long as the grant of a securities prospectus is associated with high costs.

Also it takes a pioneer company, the trust, this new Form of capital measure. So far, these are often companies that come from the crypto industry. The screw manufacturer or an automotive supplier from Baden-Württemberg missing at present. Accordingly, there are especially high-risk companies are currently carrying out an STO and the way for established companies to pave. It is a cultivation process that needs to Mature over a number of years. Retail investor participation and liquidity of stock exchange trading are mainly a question of time and of the corresponding companies.

Unfortunately, very few companies are currently in the process of the substantial work and an Investment to justify. Similar to the Initial Coin Offerings have crept in even in the case of STOs, many companies that are supposedly innovative. Investors should be always aware that regulation protects against a bad Business Case.

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