Listed Companies launch ICOs
Welcome to the ListedCo. Coin Offering (LCO)
The Singapore Stock Exchange has released guidelines for listed companies that wish to launch ICOs.
1. Any listed issuer that intends to carry out an ICO is expected to consult SGX RegCo beforehand. To facilitate the consultation process, they require the listed issuer to provide legal opinion on the nature of the digital tokens as well as its auditor’s opinion on the ICO’s accounting treatment. The opinions should come from reputable professional firms.
2. SGX retains the right to require additional opinions to be obtained so as to ensure that the relevant statutory requirements are complied with. They will also provide a checklist to the listed issuer on the compliance matters that should be addressed.
3. When the issuer initially announces its ICO, the following disclosures must be included so that shareholders of the issuer are apprised of the fund-raising:
• The rationale for, and risks (including operational, cyber security, manipulation, legal and reputational risks) arising from, the ICO;
• The use of funds raised and key milestones to be achieved in utilising the funds;
• “Know-your-customer” checks to be conducted to address money laundering and terrorist financing risks;
• The accounting and valuation treatments for the ICO;
• The use of existing issuer funds to conduct the ICO, if any;
• The financial impact on the issuer as a result of the token issuance as well as impact of any contingent settlement provisions;
• Any impact on existing shareholders’ rights; and
• Any other information as SGX RegCo thinks necessary.
4. The issuer can also consider holding sharing sessions with shareholders to ensure that they fully understand what an ICO entails for the issuer, thereby enabling shareholders to make informed decisions about the issuer in respect of the ICO.
5. The listed issuer must also come to an agreement with its statutory auditors on the scope of the audit which should provide assurance that the ICO has been properly accounted for in their financial statements, and that associated risks have been adequately addressed and milestones on utilisation of funds raised have been adhered to.
6. Post-ICO, SGX RegCo would expect the listed issuer to keep its shareholders informed of material information, the development of the ICO and digital tokens on a timely basis, as well as the use of ICO proceeds, among other such crypto-currency related disclosures.
“Tokenisation is the future of traditional business. At this point it is an inevitable, due to the efficiencies and transparency it will bring. There is a tremendous amount of value waiting to be unlocked by LCO’s.”
Sam Lee, CEO of the Blockchain Global investment fund.
The ICO is branching out: Specialised ICOs are where it’s at today. Many are carefully targeting investors with a particular interest in a specific sector.
We have the STO, which is an ICO aimed at qualified investors and thus avoids regulatory obstacles.
And we have the Listed Company Coin Offering (Listedco. Coin Offering or LCO). Because the issuer is listed, questions about the right to emit tokens as an instrument do not arise.
Some regulators have already taken this position publicly. Lawyers are already advising listed companies that issuing a utility-token based ICO is OK.
The position taken by the Singapore Stock Exchange (see on this page) is not far from that of the US Securities and Exchanges Commission – a position made public in an investor alert published in 2017 (see this page).
The main concern for regulators is not about the LCO itself, rather they wish to monitor the effect it could have on shareholders.
For now, we have at least three interesting LCOs already in the works (see the chart).
Certainly, Asia is the source of several major LCOs. The Japanese real estate firm Ruden, listed on the Tokyo Stock Exchange, will launch the ICO in Singapore to develop its Ruden Real Estate Online Service Platform with the blockchain. The platform is designed for matching real estate sellers and purchasers.
“With the help of Ruden smart contracts, we will improve the efficiency of real estate transactions and make every transaction tamper-resistant. At the same time, we will tackle the problems such as major geographical restrictions on real estate transactions, limited currency exchange, long transaction cycles and high handling fees. The seller releases the property data that has been confirmed on the platform, and the uploaded data on the platform will be recorded on the blockchain, forming a Ruden smart contract for the property. The property uses the stable currency Yen Coin as its denomination unit. The buyer searches for a suitable real estate through the platform and pays to the smart contract deployed by the real estate. The Ruden Coins will act as tokens in place for transaction fees,” the press release explains.
Ruden has not yet set a date, nor fixed the soft and hard caps for the ICO, but it will have the privilege of being the second LCO to take place.
The first is almost over, ending on Dec. 31. It is launched by Naga, a Deutsche-Boerse-listed fintech group, founded in 2015, and which was taken public on the Frankfurt Stock Exchange (Deutsche Boerse) in July 2017. As of November 2018, it had a market capitalisation of around €300 million.
Naga made its first money with SwipeStox, a crypto-based trading platform, and has expanded into crypto trading.
To fund further expansion, Naga decided to hold its own token sale. And, to date they have raised almost $16 million out of the $20 million they were planning to raise in the sale.
Neither Singapore, nor Germany has opposed or raised any obstacles to these ICOs. And Naga’s success suggests that LCOs are attractive.
“We are expecting quite a few down the pipe in the coming year,” Hui says.
Ruden disrupts real estate industry -
Breaking Bricks & Mortar
The utilisation of blockchain technology will enable Ruden to resolve long-standing issues in the real estate industry, including information asymmetry, high transaction hidden costs, inefficient transaction process, etc. Ruden’s blockchain-backed platforms will facilitate the reconstruction of industry value chain, whilst bringing Ruden to the forefront of the real estate industry.
US SECURITY AND EXCHANGE COMMISSION
INVESTOR ALERTS AND BULLETINS
Investor Alert: Public Companies Making ICO-Related Claims
Aug. 28, 2017
The SEC’s Office of Investor Education and Advocacy is warning investors about potential scams involving stock of companies claiming to be related to, or asserting they are engaging in, Initial Coin Offerings (or ICOs). Fraudsters often try to use the lure of new and emerging technologies to convince potential victims to invest their money in scams. These frauds include “pump-and-dump” and market manipulation schemes involving publicly traded companies that claim to provide exposure to these new technologies.
Recent Trading Suspensions
Developers, businesses, and individuals increasingly are using ICOs – also called coin or token launches or sales – to raise capital. There has been media attention regarding this form of capital raising. While these activities may provide fair and lawful investment opportunities, there may be situations in which companies are publicly announcing ICO or coin/token related events to affect the price of the company’s common stock.
The SEC may suspend trading in a stock when the SEC is of the opinion that a suspension is required to protect investors and the public interest. Circumstances that might lead to a trading suspension include:
A lack of current, accurate, or adequate information about the company – for example, when a company has not filed any periodic reports for an extended period;
Questions about the accuracy of publicly available information, including in company press releases and reports, about the company’s current operational status and financial condition; or
Questions about trading in the stock, including trading by insiders, potential market manipulation, and the ability to clear and settle transactions in the stock.
The SEC recently issued several trading suspensions on the common stock of certain issuers who made claims regarding their investments in ICOs or touted coin/token related news. The companies affected by trading suspensions include First Bitcoin Capital Corp., CIAO Group, Strategic Global, and Sunshine Capital (read more...)