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- 🌴 An STA Client is Tokenizing Tomorrow
🌴 An STA Client is Tokenizing Tomorrow
July's updates from the STA team
Security Token Advisors
July 05, 2022
In this month's edition of The ReCap we'll be covering:
Industry News: More liquidity on the way
Real Estate News: Billionaire Henry Cheng is tokenizing
Wall Street Adoption: Arca's Collateral Management
Vendor of the Month: TerraChain
Advisor Spotlight: Alec Beckman
Client Spotlight: Security Token Market
Marketing STOs 101: Marketing for your Crowdfund
Announcements: Ask a Token Advisor tomorrow at 12pm EST
But first...
Just like that we’ve come up on the 6 month anniversary of The ReCap and I couldn’t be more excited about where the industry is headed! Specifically because tomorrow, July 6th, our sister company Security Token Market (STM.co) is making history by launching the first web3-enabled STO on the Avalanche Blockchain. Investors who choose to pay with USDC will immediately be issued security tokens to the same wallet. Now that’s cool!
And furthermore, the crypto industry is starting to pay attention to security tokens as the SEC Chairman continues to cry securities fraud while the asset class itself enters into a bear market. Better yet, numerous exchanges around the world continue to proceed with acquiring the right licenses to launch exchanges. Surely, some fantastic issuers will be tantalized by these new platforms. For those of you who are showing their support and plan to participate in our offering, I say thank you. Let’s tokenize the world together.
Best,
Founder and CEO, Security Token Advisors
By John Pittman AKA "The Token Advisor"
Extremely exciting news coming from STA’s sister company with their crowdfund officially going live. The offering will be available for investment on the Securitize platform and is open to all investors. There is also innovation because this is the first tokenized offering that will be launched on the Avalanche blockchain. For those who may not know Security Token Market is the leading media company in the security token industry providing updates, educational material as well monitoring the data for existing trading tokens.
The Osaka Digital Exchange, or ODX, a new private financial exchange in Japan, opened on Monday, starting trading of stocks and exchange-traded funds. The ODX became the third private financial exchange to open in the country. The new exchange is expected to serve as an alternative to the Tokyo Stock Exchange, which has handled 90% of trading in Japan in terms of value. Osaka Digital Exchange Co., the operator of the ODX, is 70% owned by SBI PTS Holdings Co., 20% by Sumitomo Mitsui Financial Group Inc. and 5% each by Nomura Holdings Inc. and Daiwa Securities Group Inc. The ODX also has a goal to become Japan’s first exchange for digital securities using blockchain technology as early as next fiscal year starting in April.
Realio plans to trade its security token (RST) on tZERO ATS, the regulated alternative trading system operated by tZERO ATS. With the addition of RST, this marks the second digital asset that Realio intends to trade on a regulated digital securities trading platform that offers continuous liquidity. RST holders will participate in the equity returns generated by Realio Technology LTD and the Realio Network through tokenization and asset management fees, crowdfunding, transfer agent services, and interest earned from collateral assets, among other things. In addition, RST holders, through Realio Technology LTD, will soon have exposure to the realioVerse, Realio's metaverse project announced earlier this year.
Petale Group and Turbo Cereal have formalized an alternative and innovative financing model to meet the liquidity needs of farmers. The objective of the green fund is to develop an alternative investment model between Petale’s tokenized fund and Turbo Cereal’s trading activities to modernize the financing of the sector through Petale’s digital asset while offering attractive returns on investment. By concluding an agreement for an initial fundraising round of 10 million euros ($10.73 million), accessible from Petale’s platform, this initiative creates a virtuous cycle of circular economy, allowing the financing of a first harvest thanks to the alternative-digital financing mechanism. This first fundraising could be extended to 100 million euros ($107 million) by 2023, depending on investors’ appetites.
By Alec Beckman
Commentary: Private Placement disclosures will become more common which will create a revolutionary shift in liquidity
For many real estate companies in the private placement world, sponsors and GPs are hesitant to provide market information. They do not have to disclose much, if any information to the general public as most real estate deals fall under exemption Reg D. This is for good reason, as many fear competitors having better information on market lease rates giving them the ability to undercut their leases in equally desirable locations.
With tokenized real estate allowing equity to be listed in secondary markets, the assets that have more disclosures (audited financials, rent rolls, pro formas) readily available will be the beneficiaries of more efficient liquidity with prices closer to net asset value. It will happen slowly, but real estate sponsors and GPs will start to make more public disclosures.
Articles
Knight Dragon, a London-based property developer owned by Hong Kong’s Henry Cheng, is offering investors a share in the profits of one of Britain’s largest urban renewal projects by using blockchain technology.
Knight Dragon announced Tuesday that it plans to issue 100,000 security tokens. The tokens, named KDB4, will entitle their holders to a share of 80% of the gross profits generated from Knight Dragon’s Building 4. The 191-unit tower is part of the Upper Riverside development, an apartment complex within the company’s landmark Greenwich Peninsula project.
“We have a track record of being business pioneers and the fast-growing blockchain economy offers exciting new opportunities for Knight Dragon,” Cheng, the chairman of Knight Dragon, wrote. “Our leadership team is always open to, and seeking, innovative initiatives which can add value to our business.” Cheng added that Knight Dragon will explore the possibility of applying tokenization on other real estates within the company’s portfolio.
Through a collaborating and co-investing blockchain based platform, Wbuild aims to give anyone access to the best real estate investment opportunities worldwide while encouraging sustainable investing. Their first offering is going live in August.
Wbuild brings real estate assets directly into the blockchain through asset tokenization, making investing more accessible, transparent, cost efficient and liquid. The goal is to allow users to invest both in property and developments including asset classes in residential, commercial, industrial, conservation and hospitality. With this technology, anyone can partially invest in real estate developing their own portfolios of global assets.
On an institutional level, collateral management is most commonly used by banks, broker-dealers, investment firms, and other associated parties to reduce risk and improve their own credit profiles. This is especially applicable to parties that partake in various credit & debt investments, as it would make sense to reduce exposure to certain investments like higher-yield and/or unsecured bonds.
Parties are able to reduce their risk to products on their balance sheets through collateral management processes. For instance, a firm might be holding onto a 14% coupon corporate bond that’s lowly rated by Moody’s or Fitch. They could sell a small portion off and/or exchange a portion of that bond with another institution in a credit swap. This would essentially dilute Firm A’s position in the 14% bond while adding perhaps a higher quality product to its own balance sheet, and therefore improving its own credit profile.
Rather than limiting this practice to debt, tokenization can unlock assets of all kinds with the equivalent efficiencies as transferring cash between banks. Traditionally, cash, treasuries, and other government and high-quality debt products are the most common assets used in collateral management — because they are the most liquid and reliable. Still, the process of sending cash wires or trading/pledging treasuries from Bank A to Bank B in order to meet liquidity requirements, reserve ratios, and credit covenants takes longer than it should in a digital world.
This is where the digital assets investment firm Arca pioneered a tokenization-powered method of collateral management through the Arca Treasury Fund (ArCoin).. Tokenized treasuries can be sent in a matter of minutes (or seconds) and can be used for parties involved to precisely manage their books, records, and desired transactions. The price of the ArCoin token has been quite stable at $1.00 NAV through Arca’s management of the fund that holds the treasury assets, and therefore the price risk is quite low. Given that, this can be used on a greater scale for collateral and credit management, and will probably find other significant use cases within the financial services infrastructure.
While this product and similar ones will be priority for integration, the future financial services landscape for collateral management practices may even include tokenized real estate, tokenized private shares, tokenized private investment fund interests, tokenized corporate debt, and more. Since these assets are typically illiquid and difficult to move, they are rarely (if ever) used in the pledging and management process, and may unlock billions of dollars worth of assets for the involved parties.
The STA team wishes to spotlight the security token issuance platform TerraChain, and congratulate them on their first ever tokenization project that occurred in Q2 of this year. Working with Naki Group, TerraChain tokenized 34 high-income units in the Silvertown Metropolitan condo building and will likely serve as a proof-of-concept for additional projects in the area and in Naki Group’s portfolio, which focuses on hospitality, realty services, and property development.
Additionally, TerraChain partnered with the HKVAX, a securities exchange in Hong Kong, to forge a pathway for secondary trading liquidity. Hong Kong remains as one of the more valuable jurisdictions for tokenization given the sheer amount of assets and digital interest. This partnership and proof-of-concept with Naki group will likely open the faucet for additional security token rollouts on both the primary and secondary sides of the market.
TerraChain’s operating thesis stems from “connecting directly to assets through a “data oracle” that captures asset-level financial & operating data on-chain so that it can be verified by existing & prospective investors and utilized by issuers to automate investor management.” Proper and verifiable data is becoming an increasingly important piece of the equation when it comes to tokenizing the world, and we are excited for future developments out of the TerraChain team.
Say hello to the newest member of Security Token Advisors, The talented: Alec Beckman.
Alec lives for the tokens, blockchain and consultant so we are over the moon about his addition to the STA power team and that’s why Alec is our advisor of the month!!
Alec's official STA title is head of growth & partnerships for Security Token Advisors with a focus on asset tokenization. He is here to join our mission of improving liquidity strategies within the industry, ease the transfer of ownership and improve data management throughout the company.
He also founded a blockchain consulting company that was acquired in 2020.
Alec is a Penn State graduate and has a pretty impressive professional background for such a young guy! He also co- founded two companies of his own. Advantage Blockchain a full service consulting, investment, and advisory firm unlocking value for businesses using blockchain technology as well as co-founding BitGreen, a proof of stake blockchain network focused in sustainability and governance.
Working for Vertalo for over 2 years, Alec helped build out their real estate department as director of business development as well as many other credible accomplishments & has established himself as an important figure in the industry.
When he’s not working, he is probably doing something sports related from watching to tracking the data (which helps him make some of the best educated sports bets Ive ever seen).
He also loves to travel & is working his relocation to Miami, FL to officially join the STA team in fall of this year.
We are so happy Alec is a part of our team & we can't wait for all of you to get a chance to work with him!
Connect With Alec:
Twitter: https://twitter.com/alecbeckman_AB
This month’s spotlight is a unique one as we’ll be covering our sister company, Security Token Market (STM). We advised on their regulation crowdfund security token offering which is going live tomorrow!
Security Token Market is a global oracle for blockchain-based assets with a focus on regulatory compliant digital securities. They track over 200 live trading equities, fractional real estate properties, debt products, and more across 200 countries and territories totaling over $15B in secondary market cap.
They are also the leading media company in the industry, with four professionally produced shows developed in house including:
The Security Token Show newscast
Open Tab, interviewing tech leaders in Miami/crypto
Spilling the NFTea, an all-women show dedicated to creating a more friendly environment to learn more about Web3
Crypto Con Leche, an all-spanish show made to share knowledge on crypto to Spanish-speaking audiences around the world.
STA and STM joined forces back in August 2021 to put together the token structure, pick the vendors necessary for it, and our go-to-market strategy. We announced the Testing the Waters campaign on STM’s 3rd birthday: October 11th, 2021 and STA has been advising the team since.
The offering will go live on July 6th with a party for investors held at a Marlins game on July 15th! Check out the offering on Securitize and RSVP for the party here!
Marketing for your Crowdfund (What you Can and Can’t Do)
Raising capital from thousands of investors (including your customers, fans and general public) has never been easier through a Regulation CrowdFund (Reg CF).
Through Regulation Crowdfunding, any investor over 18 years old can buy securities in private companies and these offerings are open to the public.
The trick is to get it done while still complying within the SEC’s Regulation Crowdfunding (Reg CF) Compliance requirements. One mistake can affect your entire crowdfund which is why this article here will serve as your blueprint for Reg CF Marketing Success!
Stage one: Pre- Launch
Testing the Waters (TTW)
Since advertising for the raise can be limiting, it could be tough to know whether or not your raise will succeed. Although there are no guarantees, there are some things you can do beforehand to get an idea of how successful your reg CF will be.
“Testing the Waters,” is all about talking about your upcoming crowdfund and having people pledge the amount of money they would like to invest BEFORE your raise is SEC approved and your Form C is filed.
Form C is the offering statement your business files stating they are looking to raise capital from accredited and non-accredited investors through online crowdfunding (RegCF) without all of the responsibilities that come with registering the offer and sale of securities with the SEC.
Benefits:
Gives investors a chance to learn about your campaign
Let’s you know if you are on-track to having a successful campaign
Brings awareness and some exposure to your fund before the launch
Gets investors talking about your raise before they have access to it causing fomo.
A chance to market directly to your community to ensure a successful raise when it goes live.
What you can do:
Create oral or written communications to find out if investors are interested in contributing to your fund. These communications can be made through email, social media platforms (i.e. Instagram), and/or posting on a crowdfunding portal site. The content of those communications are not limited but it must state that:
No money or other consideration is being solicited and if sent in, it will not be accepted.
No offer to buy the security can be accepted.
No part of the purchase price can be received until the offering statement is filed and only through the platform of an intermediary.
A person’s indication of interest includes no obligation or commitment of any kind.
Note: All types of communication during your Test the water campaign needs to be recorded for SEC & compliance.
What you can collect:
Potential investors name, address, phone number and/or email address.
Any discussion about doing a Crowdfund should be in compliance with TTW rules. Non-compliant communication made prior to filing the Form C may be seen as a “Bad Act” can prevent you from being able to use Regulation CF, Rule 506, or Regulation A in the future.
What you CAN and CAN’T Say Prior to Pre-Launch
Prior to pre-launch you have to be careful about what you mention while advertising. The SEC says “An issuer may not advertise the terms of a Regulation Crowdfunding offering except in a notice that directs investors to the intermediary’s platform and includes no more than the following information.”
This means you have to be CAUTIOUS with the message you are putting out.
There are two ways to go about this:
1. You CAN have communication that DOES NOT mention the “terms of the offering”
2. You CAN have “tombstone” communication.
See the example below to learn about each kind of communication
Note: Both types of communications are permitted but cannot be mixed or combined.
Now that you know the rules and how not to get canceled by the SEC, stay tuned for my next article on how to develop a Marketing Strategy for your Crowdfund.
Ana The Marketer,
Instagram: Anathemarketer
LinkedIn: Anayansy Hernandez
Twitter: anathemarketer
ANNOUNCEMENTS:
Ask a Token Advisor
Have questions around tokenization, securities laws, blockchain, STA, or anything Web 3? Great, we have answers!
Join our Head of Consulting Adrian Alvarez and Head of Research Peter Gaffney tomorrow at 12pm EST and ask away on Twitter Spaces. Set your reminder 👇
Disclosures:
• No money or other consideration is being solicited, and if sent in response, will not be accepted;
• No offer to buy the securities can be accepted and no part of the purchase price can be received until the offering statement is filed and only through the platform of an intermediary (funding portal or broker-dealer); and
• A person’s indication of interest includes no obligation or commitment of any kind.