The Guide to an STO: Why Not an IPO?
Today we will discuss an important subject, namely, the advantages of an STO (Security Token Offering) as opposed to a regular IPO (Initial Public Offering).
If you’ve been following us for a while, you already know that an STO is essentially a crypto version of a traditional IPO. The security tokens have much in common with IPO shares, since they both pass the Howey test and allow their holders to claim rights to the company’s revenue and/or vote for the crucial decisions. Be it an IPO or an STO, you as a founder have to define the type and size of assets you are about to offer your contributors. The same shares can be sold on stock exchanges for fiat money — or on crypto exchanges for bitcoins and other cryptocurrencies.
So the question is — if you still have to allocate assets and do all the paperwork to comply with the financial regulators that go after money launderers and unauthorized security sellers, then why not hold a classical IPO?
This question has got some point, and sometimes, after scrutinizing Priority Token applicants, we strongly recommend some of the founders to opt in for an IPO. However, an IPO is not always the best option.
► Target Audience
An STO allows you to collect contributions from a much wider group of people. Depending on the legal details of your project, you can target not only one market but a number of countries.
► Attracting Crypto Whales
There’s a number of people out there who’ve been in blockchain and crypto since the industry’s first days. Due to this fact, they’ve accumulated quite a fortune in crypto. Given that the majority of them are wealthy people, they don’t look for converting their savings in fiat. They still want them on the crypto side of the market, but they could do with some diversifying as well.
Your STO can provide them a way to purchase some crypto securities that are backed with real-life assets at the same time. This will allow them to stay away from fiat money and to keep a part of their money in crypto, but not only in highly volatile cryptocurrencies but also in more reliable and protected security tokens.
► Speed of Fundraising
An STO as a form of fundraising is very effective and time-saving, since it eliminates a number of middlemen and a heap of paperwork, as opposed to traditional fiat-fueled technologies. With an STO, you can raise millions of dollars within a couple of weeks — that’s something you could hardly achieve with conventional fundraising methods. And we all know that in our industry time is money.
► Cutting Costs
Of course, setting up an STO is way more tricky and cumbersome than, say, holding an ICO. However, an IPO could turn out even more time-consuming and labor-intensive. And it brings us to the point of hiring talents and paying for their efforts. An STO allows raising funds at a much lower cost. For small and medium-sized companies, an STO is an advisable choice.
Have you ever chosen between an STO and an IPO? Or maybe you have some thoughts on this matter? We’d love to hear from you in the comment section!
Stay tuned for more STO essentials, news digests, and more treats from Priority Token!
