Offering (STO) Advisory
What is Security Token Offering (STO)
Security Token Offering (STO) is an offering of security tokens that represent and perform the same functions as traditional securities, such as shares in a company.
As security tokens are defined as securities, the offering of security tokens must be legally compliant, and as such STO is a viable and safe way to raise capital for your business.
STO is an easy and regulated way to raise capital especially for startups & SME
STO is a growing market for retail investor to invest in private funds, commercial real estate, startups & SME
How is an STO conducted
STO is leveraging blockchain technology coupled with a compliant method of capital raising to overcome the traditionally inefficient way of capital raising.
Companies can raise capital from investors by issuing security tokens that represent securities, such as shares or assets (real estate) in a company.
As such, STOs must be legally compliant with the relevant securities law and in Australia, companies that conduct STOs must comply with the Corporations Act 2001.
Security Tokens will be issued and recorded on the blockchain, and can be traded on STO platforms built on the blockchain.
How is an STO conducted
Company issues digital tokens for its stocks
People purchase and pass these tokens around
Every transaction is recorded on a blockchain
The blockchain and tokens provide stock ownership information
Company automatically determines dividend payments through that information
Total STO market cap: $529,569,242.20 (as per 28/9/2020)
Benefits of STO
Lower Risk And Back By An Underlying Asset
STOs are seen as a lower risk because the securities laws that security tokens have to comply with often enforce transparency and accountability. A security token will also be backed by a real-world asset, which makes it a lot easier to assess whether or not the token is priced fairly with the underlying asset.
Compared to traditional IPOs, an STO is cheaper because of the removal of middlemen, such as banks and brokerages. Smart contracts reduce the reliance on lawyers, while the blockchain reduces the need for paperwork. This makes the whole process not only cheaper but also faster.
Fractional ownership and the ability to trade 24/7 bring additional liquidity to the market, especially with traditionally illiquid assets, such as scarce paintings, property, and collectibles.
Access To The Global Market
The ability to trade around the clock, with a range of currencies, offers investors both convenience and liquidity. These same characteristics open up the market to smaller investors who wouldn’t normally have access to the more avant-garde types of assets.
Compliant With Securities Law
STOs are legally compliant, which means they are perceived to be less of a risk and will encourage institutional investors to come on board. The more institutional investors start to invest, the less volatile the market is likely to become and the further blockchain adoption will grow.