Complete Security Token Asset Analysis: 2019
As we close out a turbulent 2019 in the security token space, two truths have become apparent: (1) security token infrastructure is beginning to permeate traditional markets, and (2) most retail investors (crypto and traditional) don’t have much interest in the current batch of security tokens on secondary markets.
Whether it’s Santander Bank originating and redeeming debt securities on the blockchain, $700B asset management firm Franklin Templeton seeking to tokenize its newest fund, or German securities exchange Deutsche Boerse settling digital securities trades on-chain, it’s clear to see that the improved efficiencies and costs benefits on a transactional basis alone are enough to attract the many of world’s largest institutions to trial new solutions for transaction and settlement.
We’ve also seen success in the space from many great companies who have successfully raised large financing rounds, with many traditional backers. This year, hundreds of millions of dollars have been invested directly into security token infrastructure. However, we have yet to fully see the same zeal for the current assets on the secondary markets. Likely due to a mix of regulatory roadblocks, investor fatigue, and low expected returns for the current outstanding assets, trading platforms struggle to provide any liquidity, justifying Jesus Rodriguez’s thesis that liquidity represents much more than just the ability to buy and sell.
The security token market in 2019 was successful in bifurcating itself from the cryptocurrency sector. Due to leveraging similar technology, regulators, issuers, and investors alike initially conflated the two asset classes without understanding the additional value and protections security tokens provide to investors. One token that paved the way and has outperformed even the traditional markets is Blockchain Capital’s BCAP token. Representing interest in their venture fund focused on investing in blockchain-based innovation, the fund has large positions in unicorns (startups with a valuation over $1B) such as Kraken, Ripple, Coinbase, and Circle, while also having positions in hot companies like Securitize, Blockstack, and Harbor. The value of the fund is up over 200% since deployment in 2017, and the BCAP token has rewarded investors with a 51% return on secondary markets in 2019.
As the security token industry has matured over time, we have seen new, innovative tokens with exciting value propositions that have been received positively from investors inside and outside of the industry. RealT hit the ground running in the second half of 2019, issuing 3 live security tokens representing factionalized ownership of both single and multi-family properties. These properties also entitle the token holder to the full rental income paid in daily dividends. The dividend return alone on each of these properties ranges from 10–13% per year in addition to the increase in the equity value of the property. The tokens were thoughtfully generated as a scarce asset and one that has attracted investors not only to buy the token at the initial sale but hold for long term appreciation. Both the BCAP token and each of the RealT tokens have emerged as top case studies for issuers moving forward who are looking to tokenize their assets successfully.
In this market report, I’ll be providing a full rundown of the health and performance of the security token secondary market. This includes all asset types and all international jurisdictions to provide a comprehensive review of the financial ecosystem. This does not include security tokens that have successfully completed a primary offering but have not launched on secondary exchanges or tokens that did not adhere to relevant compliance standards. Due to US compliance requirements in the private securities fundraising exemptions, investors are subject to lock-up periods of varying length based on jurisdiction (US vs Non-US investment). Many tokens are poised to go live in 2020 that had successful fundraising efforts in 2019, and some that have preliminary agreements for future listing have been included at the end of this report with relevant sources. The trading data referenced throughout this report is sourced directly from tZERO, OpenFinance Network, and Uniswap Exchange. All exchange data is published on stomarket.com. Data is accurate as of January 19, 2020.
Everything in this market report is for research purposes only. Nothing in this market report should be taken as financial advice or as an inducement to purchase or sell any security. Nothing in this market report should be used as legal advice. Always do your own research before making any decisions regarding financial transactions of securities.
Editor’s Note: While the term “Exchange” is used throughout this report, the financial service providers discussed are not exchanges, but alternative trading systems (ATS) registered through FINRA. Feedback from companies mentioned in this report are being considered and factual corrections will be made accordingly. Future analysis will adhere to suggested terminology and preferred representation.
Security Token Industry Market Cap
Statistics
- Opening 2019 Market Cap: $182,058,292.50
- Last Market Cap: $76,062,199.46
- Change: -63%
- Total Volume: $5,779,863.18
- Monthly Average Volume: $495,454.17
- Daily Average Volume: $16,515.14
Overview
The first segment to explore is the total market size of outstanding security tokens. Security Token Market has spent most of the last three years researching, tracking, and building in the security token industry, and in doing so, have been monitoring the secondary trading activity of nine security tokens that are now trading via secondary exchange. As of January 19, 2020, I have been able to verify three live security token exchanges — tZERO, OpenFinance Network, and Uniswap Exchange.
The earliest transactional data that is publicly available comes from tZERO settling trades for its own TZROP preferred equity token in January 2019. As the only trading token at the time, it set the industry market cap, closing on its first day at $8.75, establishing the industry market cap at $229,501,221.25. This would be the highest market cap the security token market would see all year.
OpenFinance Network launched beta trading services in late 2018 and publicly launched in the first quarter of 2019 as well. Like tZERO, it follows US jurisdictional compliance. It currently settles five live security tokens: Blockchain Capital, Lottery.com, SPiCE VC, 22x Fund, and Protos Asset Management. Unfortunately, only the recent 25 trades are available on the exchange. Editor’s note: I have been tracking the performance over time and will be using my personal records to document the year for these tokens. Moving forward, we will be publishing monthly market reports via Security Token Market to ensure price transparency is fully communicated to the public.
Uniswap recently began trading its first security token, and now it hosts three RealT tokenized properties in Detroit, Michigan. These three properties have the smallest comparative market caps of the nine live tokens but provide new, unique investment opportunities. Due to the similarities in the financial structuring for each property and the malleability for variables like size or location, Real Estate has the potential to quickly scale to become the largest asset by market cap in 2020. Due to the explosive potential of this industry, Uniswap will be an exciting exchange to watch over the course of the year.
The current security token market cap is $76,062,199.46. TZROP currently represents 58% of that market cap. The industry market cap has regularly fluctuated based on the TZROP token price, as it is not only the largest token in the industry at this point but has the most consistent daily volume, therefore also being the most liquid. Most tokens do not see daily trading, with many only seeing a few trades per month. Conversely, tZERO settles thousands of dollars of trades per day despite having the fewest assets of the three live exchanges. TZERO has demonstrated through its secondary market health that investors are actively participating in the market and are eager to invest in new assets.
Underlying Assets
The current live tokens represent a few select batches of assets:
- TZROP and LDCC provide token holders with revenue share tokens, allowing investors to share in the success of the company via quarterly dividends.
- BCAP, SPiCE, 22X, and PRTS represent limited partner interest in funds. With both venture funds as well as hedge funds, firms raise capital through passive partners known as limited partners (LPs). These partners are entitled to the return on the fund over time and now have the ability to find secondary liquidity after investment. This allows the investors to recapitalize following the fund’s capital deployment, or after evaluating the portfolio’s incipient net asset value (NAV).
- RealT has issued three real estate tokens, which represent fractionalized ownership of a single or multi-family property which also pays out daily dividends from the rental income of the tenant in the tokenized property.
12 Month Performance
The general trend in the security token industry across 2019 was downward. While the year started strong with five live security tokens in Q1 2019, OpenFinance and tZERO combined to list only one additional token, Protos (on OFN), through the rest of the year. This dampened the price of exchange tokens like tZERO’s, whose value is predicated on transaction fees from additional assets on the platform. Lack of progress on this front also signified to investors that the combination of technology, regulatory approval, and global investor demand required for security token success is still a massive hindrance to the industry. That being said, some tokens, like Blockchain Capital, have performed very well this year, as it had healthy investor demand and the NAV of its fund is on the rise. Additionally, the real estate tokens that are generating rental income for investors have seen their tokens exceeding expectations on secondary markets. Finally, with the advent of over 60 security token exchanges expected to launch in 2020 around the world in conjunction with billions of assets currently in the tokenization process, this upcoming year is set to be explosive for the industry.
Asset Breakdown
tZERO Group, Inc. (tZERO) Preferred Equity Security (TZROP)
Exchange: tZERO — USA
Private Company — Revenue-Sharing Dividend
See Live Price
Statistics
- Opening Price: $8.00
- Last Price: $1.68
- 52 wk High/Low: $9.99— $0.55
- Opening Market Cap: $182,058,292.50
- Last Market Cap: $44,064,234.48
- Change: -79%
- Total Volume: $5,478,937.24
- Monthly Average Volume: $456,578.10
- Daily Average Volume: $15,219.27
Overview
TZERO is a live security token exchange that launched its own security token prior to launch, selling the token in a primary offering in 2017. The firm, backed by public parent company Overstock.com ($OSTK), raised an estimated $130M to build a security token issuance platform and subsequent exchange — led by CEO Patrick Byrne, the company captured the heart and minds of investors and enthusiasts alike. The firm successfully launched its security token exchange, but the product hasn’t yet reached the potential that many had hoped for. Leveraging third-party Dinosaur Financial Group’s regulatory financial licenses, the exchange is still a relatively clunky interface that is a far cry from the promised sleek platform from the company’s original whitepaper.
The company has faced many distractions since raising its capital, including seeing hundreds of millions in investment pulled at the last minute, SEC investigations, and the removal of its visionary CEO Patrick Byrne. Byrne, an eccentric but innovative leader, sought to leverage a security token dividend for parent company Overstock.com. His plan was to allow public stock investors to receive a dividend of tokenized stock in OSTK at a 10:1 ratio. This raised many questions from the SEC and has been delayed for well over six months now due to investigations into the integrity of the distribution decision in addition to virulent personal matters leading to Byrne’s resignation in late 2019.
The firm has been surrounded by controversy throughout the year, but the new CEO of Overstock.com Jonathan Johnson is dedicated to persevering in the security token space and seeks to steady the ship. The exchange’s largest success of the year was receiving approval through Rule 144 to enable retail trading of their TZROP security token. Reg D 506(c) and Reg S are US private security fundraising exemptions that enable much of the current security token fundraising options but require exclusively accredited investor participation. At this time, TZROP is the only security token that enables US retail investors to buy and sell the token freely without restriction. This has been a crucial achievement for the company and its monumental impact on the industry cannot be overstated.
Underlying Asset
Don’t be fooled by the token’s misleading name — the tZERO Preferred Equity Token does not represent direct equity in the exchange. The TZROP token holders have the right to receive a quarterly dividend of up to 10% of the company’s gross revenue. The TZROP tokens also have liquidation preference over common stock in the event of an acquisition, hence the “preferred equity” title. The security token’s price relies on an investor’s confidence that the exchange can list new assets across industries and jurisdictions that are currently inaccessible to the public. This is crucial because tZERO charges fees on a per-transaction basis. To turn a profit, the company must focus on increasing the transaction volumes across the exchange.
12 Month Performance
To date, tZERO hasn’t had high enough trade volume to reach a positive gross margin. Since the exchange’s launch 13 months ago, tZERO has failed to list a single additional asset, leaving investors and enthusiasts alike wondering where the company is focusing its abundance of resources. The company continued to show a lack of direction after launching a mobile crypto trading app, dedicated solely to traditional cryptocurrencies, providing no support for its own security token. There have been reports that new issuers are hopeful for future listing, but to date, the company has not been able to overcome the regulatory, fiscal, and technological barriers preventing third party listing and settlement. Despite the exchange’s struggles to scale, Saum Noursalehi, CEO of tZERO, has been adamant that the company is prioritizing onboarding new assets.
Since going live for secondary trading, the token has struggled to maintain a stable price. Sold at $10.00 per token in its primary sale, the token has fallen over 80% since its January launch. The first few months of trading saw a strong capitulation, with the token falling to $3.00 by March. In August, the exchange announced that non-accredited investors would be able to buy and sell the token freely. This was a groundbreaking announcement by the firm, as it is still the only security token available for purchase by retail investors. Since that point, TZROP has seen an increase in daily trading volume of 23% in the second half of 2019. The price continued to fall through most of 2019, hitting a yearly low at $0.56 on December 11.
Despite a negative trend through the year of 2019, the token has rebounded by the end of December and into January 2020. 8 of the 12 trading days in January have been in the black, and in that period the asset closed above $1.70 for the first time since October. Trading volumes have been consistently healthy, and the tZERO Preferred Equity Token still maintains the largest market cap in the security token industry.
Blockchain Capital TokenHub Pte. Ltd. (Blockchain Capital, BCAP)
Exchange: OpenFinance Network — USA
Venture Capital — Limited Partner Indirect Economic Interest
See Live Price
Statistics
- Opening Price: $1.31
- Last Price: $1.98
- 52 wk High/Low: $3.15 — $1.02
- Opening Market Cap: $7,963,127.13
- Last Market Cap:$12,035,871.54
- Change: 51%
- Total Volume: $217,264.65
- Monthly Average Volume: $21,726.47
- Daily Average Volume: $724.22
Overview
Blockchain Capital is a blockchain-focused venture fund actively managed by Brad Stephens, Bart Stephens, and Spencer Bogart. It originally launched as a traditional VC structure in 2013, but with its third fund, the “Blockchain Capital III Digital Liquid Venture Fund,” the team raised $10M of the $50M fund via a security token. The fundraise for the BCAP token concluded in 2017 and the BCAP token is now listed on OpenFinance Network. BCAP is the only security token that features third-party custody support, most notably through Coinbase Custody. It is the only security token supported by Coinbase.
The company releases consistent disclosures regarding its portfolio and NAV calculations. It publishes a quarterly update which includes a breakdown of the portfolio and commentary and also posts the portfolio’s weekly NAV, including historical performance. This information is accessible here and will be referenced throughout the BCAP analysis.
Underlying Asset
Blockchain Capital’s BCAP security token represents limited partner indirect economic interest in the Blockchain Capital III Digital Liquid Venture Fund. The value of any LP interest is derived from the value of the equity or token interests in the portfolio companies the fund has invested in. The structure of the token provides investors with an economic interest in the fund’s performance after capital deployment, and in theory, the price of the token will mirror the value of the underlying portfolio. This token is an indirect economic interest, and therefore, unlike a traditional LP share, is not a dividend-paying token. Proceeds from exits in the fund’s portfolio will result in the firm repurchasing tokens on the open market and executing a token burn, which removes those tokens from circulation, destroying them permanently. This reduces the supply of outstanding BCAP tokens, resulting in an increase in token price for investors. With an indirect economic interest, the token holder receives capital gains through the secondary markets instead of through dividends.
According to their Q4 2019 quarterly report, the firm’s asset breakdown consists of 70% ($23.8M) equity:
- Kraken ($6.6M),
- Ripple ($5.5M),
- Coinbase ($3.4M),
- Circle Financial ($2.3M),
- Bison Trails ($1.9M),
- Anchorage ($1.8M),
- Securitize ($1.5M),
- Blockstack ($300k),
- Open Sea ($214k),
- CoinList ($61k),
- CoinCircle ($50k),
- Harbor ($17.5k).
17% ($5.8M) of the portfolio is in tokens, including cryptocurrencies like Filecoin, Decred, and Ether, while the final 13% ($4.2M) is held in Bitcoin and cash. The firm is still actively investing in the blockchain space.
12 Month Performance
The entire portfolio is currently valued at $33.8M based on current equity valuation metrics, up from $29.3M 12 months ago — a 13% increase in the calendar year. When contextualizing these numbers, the industry-standard compares the net asset value (NAV) of a fund over time to determine how the underlying portfolio is performing. The NAV represents the share/unit price of a fund at any given time by subtracting a fund’s total liabilities from its assets across its outstanding shares. Comparing its Q4 2019 NAV to 12 months ago, the fund has increased it’s NAV from $2.93 at the end of 2018 to $3.38 at the end of 2019. In the Q4 2019 report, the firm also notes that the entire BCAP portfolio is up 238.2% since launch in April 2017, and has a Net IRR of 56.3%. Performance figures are net of all fees and carry. These are strong performance numbers from the fund and they maintain an equity portfolio consisting of many successful companies in the industry. One risk factor is that 17% of the portfolio invested in traditional crypto tokens, which will be difficult to price moving forward due to a lack of established underlying value.
The price of the BCAP token on secondary markets seems to reflect investors’ confidence in the fund’s performance. Traditional equity investments can take 5–7 years before exit, but it appears that investors are confident in the capital deployment by the firm. After launching at STO at $1 per token, the token reached a high of $3.15 in July and closed the year at $1.98, netting investors a 51% return in 2019. The BCAP token stands out through its high trading volume, which dwarfs the other tokens trading on OpenFinance Network. With over $200,000 in trading volume in 2019 and a positive price trend, the BCAP security seems to have strong momentum heading into 2020.
LDC Crypto Universal PLC Digital Securities (Lottery.com, LDCC)
Exchange: OpenFinance Network — USA
Private Company — Revenue-Sharing Dividend
See Live Price
Statistics
- Opening Price: $0.97
- Last Price: $0.18
- 52 wk High/Low: $1.01 — $0.07
- Opening Market Cap: $41,504,054.45
- Last Market Cap: $7,701,783.30
- Change: -82%
- Total Volume: $15,010.98
- Monthly Average Volume: $1,501.10
- Daily Average Volume: $50.04
Overview
Lottery.com is one of the largest providers of lottery games and payouts in the world. It tracks Powerball, Mega Millions, and more through their mobile app. The company was thrust into the security token spotlight after launching a lottery security token offering investors exposure to a new upcoming raffle, The Global Impact Raffle. The idea centered around collecting raffle participation and incentivizing users to continue playing through gamified economic mechanisms. However, since the inception in 2018, not much has been heard from the initiative. The Global Impact Raffle is not a live competition and no new updates regarding the planned platform or incentive features have been recently published.
Underlying Asset
The token offers investors 7% of the net revenue on the planned Global Impact Raffle.
12 Month Performance
Like many security tokens, the LDCC token experienced a severe lack of liquidity throughout the year. The token does not have daily token transaction volume. Many initial trades post-launch consisted of no more than 10 shares traded sporadically over months. Due to the lack of liquidity, when a large holder was looking to offload a portion of their holdings, they were forced to settle for a price that is much lower than the current asking price. With such a small number of shares being exchanged in a given time period, an investor quickly would experience extreme slippage, causing the price to rapidly decline. On multiple occasions, it has been observed that a large LDCC sell order caused massive slippage, resulting in the investor taking a 50–75% discount on their tokens for liquidity. In large selloff periods across the year, it can be seen that immediately after selling large chunks of a token, exactly one share was then purchased at a market premium. This results in a closing price for the token appearing to be at a premium, while thousands of shares were covertly sold for an incredibly depressed price. This is a misleading tactic that can confuse new investors by disguising the firesale.
Due to the lack of clarity in past transactional records, every example of such practices has not been recovered. In one specific jarring sell-off period across the two-month span of October 25 through December 25, a clear lack of liquidity is demonstrated. All trades over this period have been recorded by Security Token Market’s research team. This is the complete transaction history in the time period specified above.
- On October 25, 2019, the LDCC token opened at a share price of $1.01. In one transaction, thousands of shares of LDCC were sold at $0.20. Immediately following the sale, 1 share was purchased at $0.87.
No other trading activity occurred that day or following until, - On October 27, 2019, 1000 shares of LDCC were sold at $0.25. This was immediately followed by 1 share purchased at $0.87.
No other trading activity occurred that day or following until, - On October 30, 2019, 2301 shares of LDCC were sold at $0.30. This was immediately followed by 1 share purchased at $0.87.
No other trading activity occurred that day or following until, - On October 31, 2019, 3708 shares of LDCC were sold at $0.30. This was immediately followed by 1 share purchased at $0.87.
No other trading activity occurred that day or following until, - On November 2, 2019, 4000 shares of LDCC were sold at $0.30. This was immediately followed by 1 share purchased at $0.87.
No other trading activity occurred that day or following until, - On November 11, 2019, 5000 shares of LDCC were sold at $0.20. This was immediately followed by 1 share purchased at $0.67.
No other trading activity occurred that day or following until, - On November 12, 2019, 107 shares were purchased at $0.67.
No other trading activity occurred that day or following until, - On November 20, 2019, 4822 shares of LDCC were sold at an average of $0.25. This was immediately followed by 5 shares purchased at $0.67.
No other trading activity occurred that day or following until, - On December 24, 2019, 20000 shares of LDCC were sold at $0.10. Immediately before this massive selloff, 35 shares were purchased at $0.70.
Across this 2 month period, trading occurred on 9 separate days. In this span, over 40,000 LDCC tokens were sold between $0.10–0.30, and 153 LDCC tokens were bought between $0.67–0.87. Whereas in a competitive market the selling volume pressure would suggest a price decrease in this time period, LDCC’s closing price maintained a much higher level than its average transaction price due to the individual share purchased following each selloff. On October 25, the closing trade was at $0.87, which it would hold until November when each trading day closed with a $0.67 trade. December 24 featured the largest selloff, but the $0.70 trade for 35 shares that occurred in a similar pattern as the previous selloffs was incidentally settled prior to the large sale, leaving the closing price of the year to end at $0.10. It appears that this was unintentional, and left the LDCC price at the $0.10 floor that was often disguised in previous sales with thinly-veiled purchase orders.
Regardless of the intention behind these trades, one should be wary of this token’s value proposition and liquidity in 2020. With no indication of any development of the promised raffle and shaky market support for the token along with very asymmetric information regarding the trading prices and the true order book for this asset, the team at Lottery.com very much need to address token holders and explain the objectives and plan for 2020 and the future.
SPiCE Venture Capital Pte. Ltd. (SPiCE VC, SPiCE)
Exchange: OpenFinance Network — USA
Venture Capital — Limited Partner Direct Economic Interest
See Live Price
Statistics
- Opening Price: $1.49
- Last Price: $0.98
- 52 wk High/Low: $1.50 — $0.98
- Opening Market Cap: $12,612,386.61
- Current Market Cap: $8,295,395.22
- Change: -34%
- Total Volume: $40,118.17
- Monthly Average Volume: $4,011.82
- Daily Average Volume: $133.73
Overview
SPiCE VC was launched by Carlos Domingo, Tal Elyashiv, and Ami Ben-David in 2017. After waning confidence in the ICO scene, the three teamed up to launch a fund focused around asset-backed security tokens. They built the fund and self-issued their security token — eventually spinning off the issuance piece of their fund, launching Securitize, a well known and very successful issuance platform in the industry. Since then, Ben-David has left the fund, while the other two partners continue an active role in deploying capital through SPiCE VC. Domingo and Elyashiv are still very active at Securitize, which is also a portfolio company of the SPiCE VC fund.
The company releases consistent disclosures regarding its portfolio and NAV calculations. It publishes a quarterly update which includes a breakdown of the portfolio and commentary. This information is accessible here and will be referenced throughout the SPiCE analysis.
Unlike Blockchain Capital, SPiCE VC does not actively publish its positional holdings in each portfolio company, citing that may allow analysts to “reverse engineer” private company valuations, which is proprietary information that private companies are not required to disclose. This is less transparent for investors and makes the fund slightly more difficult to evaluate compared to Blockchain Capital.
Underlying Asset
SPiCE VC’s token represents a limited partner direct economic interest in the SPiCE VC fund. Unlike BCAP, the SPiCE VC token pays proportional dividends directly to investors based on the exits from the portfolio. This model is straightforward and directly represents one share of an LP in the SPiCE VC fund.
According to their Q3 2019 quarterly report (most recently published), the firm’s asset breakdown consists of 75% equity, 18% fiat, and 7% tokens. In its report, the firm does not value each asset in its portfolio, nor does it comment on which are equity investments vs. tokens, but it does give a breakdown of its full portfolio:
- Securitize
- GraphPath (acquired in 2019)
- RNDR
- Saga
- Slice
- INX
- ROX
- Bakkt
- Archax
- IOB
- InvestaX
- Lottery.com
In its Q3 disclosure, SPiCE VC first declares its total AUM, $15,162,821. Of this, 81% has been deployed, with about $2.8M USD in cash available for future investments. Of its deployed capital, SPiCE has 12 portfolio companies. Some highlights include the aforementioned Securitize in addition to INX, Bakkt, Archax, and Lottery.com. Bakkt is the leading Bitcoin futures settlement platform, owned by the Intercontinental Exchange, the parent company of the New York Stock Exchange. INX and Archax are both aiming to launch security token exchanges in 2020 and Securitize, perhaps the most well-known issuance platform in the industry recently completed a new $14M financing round.
12 Month Performance
SPiCE VC publishes a quarterly NAV in each report to provide insight into the performance of the fund. Unfortunately, as of January 17, 2020, the firm has not published its Q4 2019 report, so for the purposes of this analysis, the Q3 NAV report was used for evaluation. The report declares a NAV of $1.32, down from $1.37 a year ago. SPiCE VC has had one acquisition, with ROKK3R AI acquiring GraphPath in 2019.
SPiCE VC’s token price has followed the general trend of the market and has seen decreasing prices throughout the year. The token price has not rebounded well, either, hitting all-time lows in January 2020. Despite the price, trading volumes have been very low, suggesting that many investors are content with holding their position and are confident in the long term viability of their investment despite its current secondary performance.
Batch 22X Ltd. (500 Startups, 22X)
Exchange: OpenFinance Network — USA
Venture Capital — Limited Partner Direct Economic Interest
See Live Price
Statistics
- Opening Price: $0.65
- Last Price: $0.30
- 52 wk High/Low: $1.00 — $0.30
- Opening Market Cap: $3,343,969.20
- Last Market Cap: $1,543,370.40
- Change: -54%
- Total Volume: $2,141.37
- Monthly Average Volume: $305.91
- Daily Average Volume: $10.20
Overview
22X Fund is the 22nd batch of companies in the 500 Startups Accelerator program. The fund is led by portfolio managers Richard Titus and Jamie Finn. 500 Startups is a global seed-round venture capital firm headquartered in Silicon Valley with a conjoining accelerator program for its portfolio companies. 500 Startups invests in up to 10% of each company, and for its 22nd batch of companies, launched a digital token to provide liquidity for investors. However, hidden deep in the FAQ section of the 22X website, they make it clear that they have no relation to 500 Startups, despite featuring the name and brand throughout the website: “500 Startups was not involved in the ideation or creation of 22X and does not officially endorse 22X.” This is clarified with the statement, “[500 Startups has] an investment interest in each of the 22X portfolio companies because of their investment through the 500 Startups Accelerator program. Since they are investors in 22X portfolio companies their investment interests may be perceived as being aligned with companies in the 22X portfolio raising investment capital. But this is not an official endorsement.”
Underlying Asset
The token structure follows a similar structure as the other fund tokens explored in this analysis. Investors receive tokens in 22X and are entitled to direct limited partner interest in the fund. 22X aims to own 2.5% to 10% of the equity in early-stage startups, valuing each company at a set $10M while flexing the equity for each investment. Investors are paid dividends upon exit at a proportional amount to their token holdings and may liquidate their holdings on a secondary exchange like OpenFinance Network or other supporting exchanges in the future.
No NAV report or disclosure is provided publicly regarding the holdings of the fund. It has disclosed its 15 company portfolio, but no other financial details are included on their website.
- Agent Bong
- Cor
- Fincheck
- FreightRoll
- FyodorBio
- Koinbros
- Mailhaven
- MobileForms
- MyndLift
- Quantyzed
- Redock
- Rever
- Shortpoint
- Texel
- VCV
12 Month Performance
The token price has not performed well in 2019, and unlike with other more transparent funds, this secondary market depression might be reasonably explained by a lack of price discovery due to opacity in the investment process and the portfolio’s value. With the ability to liquidate their holdings, something actively promoted by 22X across their website, the fund provides no information to investors and enthusiasts to anchor the price or encourage long-term holding. The only other information I was able to find online is that their target raise was $35M. Since then, investors do not publicly know their total assets under management, NAV price, or currently deployed capital. It could be estimated that with 15 companies at a range of 2.5–10% equity in each, 22X has deployed between $3.75–15M in its current portfolio. It is not clear whether the full $35M raise was completed at this time.
Perhaps investors are being privately briefed on the performance of the fund, but this lack of public transparency seems to hurt an investor’s ability to accurately assess the fund. With a token traded on the open market (although to accredited investors only), many outsiders will experience friction when evaluating the underlying value of the fund’s portfolio. With no NAV or total AUM available publicly, it is not possible to compare the fund’s size or performance with the other tokenized funds. Irrespective of the lack of transparency, the token performed similarly to the rest of the market.
RTS CAM Pte. Ltd. (Protos Asset Management, PRTS)
Exchange: OpenFinance Network — USA
Hedge Fund — Limited Partner Direct Economic Interest
See Live Price
Statistics
- Opening Price: $0.60
- Last Price: $0.50
- 52 wk High/Low: $1.50 — $0.50
- Opening Market Cap: $2,010,105.60
- Last Market Cap: $1,675,088.00
- Change: -17%
- Total Volume: $184.48
- Monthly Average Volume: $30.75
- Daily Average Volume: $1.02
Overview
Protos Asset Management is a cryptocurrency hedge fund based out of Switzerland that actively manages its portfolio to return capital gains for investors. Led by Christian Nagel of Earlybird Venture Capital (+1B AUM), Jules Green of Ashmore Group (73B AUM), and Ryan Zurrer of Polychain Capital, the team leverages their experience in traditional VC and are applying that to the crypto space through Protos. The team is actively investing in crypto, leveraging stop losses to prevent exposure to drops in the market, and keeps its undeployed capital in stablecoins to generate a yield even when out of the market.
The company releases consistent disclosures regarding its portfolio and NAV calculations. It publishes a monthly NAV update which includes a breakdown of the portfolio and commentary. This information is accessible here and will be referenced throughout the PRTS analysis.
Underlying Asset
Protos Asset Management’s token represents non-voting limited partner direct economic interest in the Protos fund. The firm aims for a 2% monthly compounded return and provides tools via their terminal for tracking the market.
According to their Q4 2019 disclosure, the assets in the current Protos portfolio are:
- ARGO BLOCKCHAIN PLC
- Beam Ltd ICO
- Binance USD
- Bitcoin
- BTC CFD
- CoinsDNA Holding AG
- Cornhill Capital Limited
- CrownThrown, Inc.
- ETH CFD
- Ethereum
- EURO
- Motto Technologies Limited
- Paxos Standard Token
- Radar Relay
- USD
- Xip Network Inc
The firm did not provide indications on proportionality or total AUM.
12 Month Performance
In their December 2019 NAV Report, Protos declared a NAV of $0.54 up 6% in the last 12 months, with a $0.51 NAV in December 2018. Since that time, the portfolio has consolidated considerably, removing many utility tokens from its portfolio.
The token is the newest to OpenFinance Network, launching much later in 2019, and has experienced very little volume to date. At this point, there is not enough information to accurately evaluate its secondary market performance. The value of this token on the open market is expected to fluctuate as the price has no anchor to properly define its underlying value without public AUM values in conjunction with instrument type (equity, token, SAFT), and percentage breakdown of the owned portfolio companies.
RealT: 9943 Marlowe Street, Detroit, MI
Exchange: Uniswap Exchange — Decentralized
Real Estate — Single-Family — Fractionalized Rental Income
See Live Price
Statistics
- Opening Price: $63.30
- Last Price: $67.75
- 52 wk High/Low: $75.03 — $62.38
- Opening Market Cap: $63,295.20
- Last Market Cap: $67,750.00
- Change: 7%
- Total Volume: $14,852.42
- Monthly Average Volume: $4,950.81
- Daily Average Volume: $165.03
Overview
RealT launched its first tokenized property, 9943 Marlowe Street in Detroit, MI, in November 2019. The property is a 1027 sq. ft. single-family home in Detroit, Michigan. It was purchased in December 2018 for $33,500 and had around $15,000 in renovations prior to launch. In order to tokenize this single-family home, the company assigned legal ownership of the entire property to a single LLC. The LLC for 9943 Marlowe Street was then divided into 1,000 shares. Each share of the LLC was then legally tied to a security token which was then sold to investors in 2019. All 1,000 shares are specifically listed as equal owners of the LLC, which in turn owns the property. This creates a clear paper trail of ownership and allows any token holder to verify their underlying asset through the LLC.
Underlying Asset
The value of the Marlowe Street token lies in the equity value of the home coupled with the rental income earned from short term rentals of the property (managed by the token’s issuance platform, RealT). RealT manages the outstanding property, maintaining the facilities and onboarding renters to the property. From here, the property follows a traditional rental process — the renter pays monthly rent payable to the owner of the property. The unique facet with RealT’s tokens is that there is not one owner, but 1,000 tokens that are all owed a fraction of that rent.
The property currently has tenants that are paying $10,200 per year in rent, and with 1,000 outstanding tokens, each token is entitled $10.20 over the full 12-month rental period. The asset was valued at $63,750 in the initial offering, selling each token to investors for $63.75 each. At a $63.75 face value and $10.20 in yearly rental income on the asset, this property provides investors with a 13.9% annual return, as expressed by the CAP rate, a common return metric used to compare real estate investments. This rental income is paid daily to token holders via a stablecoin pegged to the US Dollar which can be reinvested or exchanged for the corresponding value in fiat.
12 Month Performance
The token has liquidity on the Uniswap Decentralized Exchange as well as through a liquidity pool on the RealT platform itself. With such a small supply of tokens for a very novel product, the token hasn’t seen high daily trading volume, suggesting that many investors are satisfied so far with their investment and haven’t been as active selling their tokens. Due to a low total supply and excess demand, shares of the Marlowe Street property are up 7% in just the first three months since launch on secondary markets. After launching at $63.75 per token in November, the token price has been above $70 for most of January.
RealT: 16200 Fullerton Ave, Detroit, MI
Exchange: Uniswap Exchange — Decentralized
Real Estate — 15 Unit Apartment Building — Fractionalized Rental Income
See Live Price
Statistics
- Opening Price: $159.25
- Last Price: $163.53
- 52 wk High/Low: $174.98 — $155.84
- Opening Market Cap: $605,150.00
- Last Market Cap: $621,415.52
- Change: 3%
- Total Volume: $10,183.95
- Monthly Average Volume: $5,091.98
- Daily Average Volume: $169.73
Overview
16200 Fullerton Avenue, Detroit, MI is RealT’s second property listed on the Uniswap Exchange. This time, instead of tokenizing a single-family household, the Fullerton Avenue property is a 15 unit apartment complex. The property is adjacent to Ford Motors’s 1.2M sq ft facility and anticipates providing housing to many of the employees.
Like with the Marlowe Street property, RealT assigned legal ownership of the entire property to a single LLC. The LLC for 16200 Fullerton Avenue was then divided into 3,800 shares. Each share of the LLC was then legally tied to a security token which was then sold to investors in November 2019. All 3,800 shares are specifically listed as equal owners of the LLC, which in turn owns the property. This creates a clear paper trail of ownership and allows any token holder to verify their underlying asset through the LLC.
Underlying Asset
The Fullerton Avenue complex, valued at $615,000 at the time of the primary offering, has tenants and is currently charging $99,600 in yearly rent across the entire property. The complex was divided into 3,800 shares and tokenized through the RealT platform. Each token is selling for $160.00 per share paying $26.21 per share in rental dividends, representing a 12.5% annual CAP rate. This rental income is paid daily to token holders via a stablecoin pegged to the US Dollar which can be reinvested or exchanged for the corresponding value in fiat.
12 Month Performance
The property has not completed its initial offering on the RealT website at this time. Investors do already have liquidity on the Uniswap Exchange, so the tokens can be purchased on either the RealT platform or Uniswap Exchange. The price has stayed relatively consistent as the fixed supply has not been reached yet, therefore proper free market economics do not yet apply.
RealT: 5942 Audubon Rd, Detroit, MI
Exchange: Uniswap Exchange — Decentralized
Real Estate — Single-Family — Fractionalized Rental Income
See Live Price
Statistics
- Opening Price: $77.73
- Last Price: $76.39
- 52 wk High/Low: $79.30 — $74.33
- Opening Market Cap: $58,300.00
- Last Market Cap: $57,291.00
- Change: -2%
- Total Volume: $1,266.94
- Monthly Average Volume: $1,266.94
- Daily Average Volume: $211.16
Overview
RealT’s third property is another single-family home. The 2,571 square-foot home, completely rehabilitated and rented in 2019, sits on a 6,531 square-foot lot in Detroit, MI.
RealT assigned legal ownership of the entire property to a single LLC. The LLC for 5942 Audubon Road was then divided into 750 shares. Each share of the LLC was then legally tied to a security token which was then sold to investors in 2019. All 750 shares are specifically listed as equal owners of the LLC, which in turn owns the property. This creates a clear paper trail of ownership and allows any token holder to verify their underlying asset through the LLC.
Underlying Asset
5942 Audubon Road is valued at $58,300 in the primary sale. The current tenants are paying $9,000/year in rent, netting each token holder with $8.39 in cumulative yearly rental dividends, resulting in a 10.8% return. This rental income is paid daily to token holders via a stablecoin pegged to the US Dollar which can be reinvested or exchanged for the corresponding value in fiat.
12 Month Performance
The property has not completed its initial offering on the RealT website at this time. Investors do already have liquidity on the Uniswap Exchange, so the tokens can be purchased on either the RealT platform or Uniswap Exchange. The price has stayed relatively consistent as the fixed supply has not been reached yet, therefore proper free market economics do not yet apply.
Looking Ahead
Future Rumored Tokens
tZERO
- Alliance Investments intends to tokenize at least $25 million of the value of River Plaza, a 180-unit luxury residential development that is located in Manchester, UK. River Plaza is the first project of Alliance Investments’ real estate tokenization plan to tokenize approximately $640 million of real estate projects across the UK over the next several years.
- “Hollywood’s entertainment finance structures need to evolve, and we want to lead this charge to disrupt traditional media financing. By embracing blockchain technology, we are streamlining the film and TV funding process and offering funding access directly to mini-major studios, producers and experienced indie producers.”
OpenFinance Network
BlockEstate — Real Estate Fund
- BlockEstate will use 50–100% of quarterly net profits to repurchase tokens from token holders. The repurchased tokens will be burned, decreasing outstanding supply.
Current Media — Media Platform
- The company’s token offering, $CRNC, gives brands discounted access to ad inventory within the Current network and enables users to earn rewards faster when streaming music from over 100,000 stations. Available to U.S. and non-U.S. accredited and non-accredited investors.
- MintHealth Security Tokens provide token holders with a dividend of Vidamints sales in addition to equity in MintHealth.
Aspencoin — Tokenized Real Estate — St. Regis Aspen Hotel
- The Aspen Digital Tokens are backed by ownership shares in the St. Regis Resort Aspen and pay a dividend to holders based on the performance of the asset.
Uniswap
18483 Mansfield St, Detroit, MI 48235
- This offering has sold out in primary offering. Investors are now in the token lockup period before the tokens can be released onto secondary exchanges.
9336 Patton St, Detroit, MI 48228
- This offering is coming soon.
15795 Mansfield, Detroit, MI 48227
- This offering is coming soon.
20200 Lesure St, Detroit, MI 48235
- This offering is coming soon.
15906 Stout St, Detroit, MI 48223
- This offering is coming soon.
Upcoming 2020 Security Token Exchanges
We are monitoring over 60 security token exchanges seeking to launch in 2020. Countries currently developing security token exchanges include:
United States, Canada, United Kingdom, Germany, Liechtenstein, Estonia, Netherlands, Switzerland, Gibraltar, Malta, Seychelles, Belarus, British Virgin Islands, Singapore, China, Philippines, Antigua, Jamaica, Barbados, Cayman Islands, Mauritius, United Arab Emirates, and Greenland.
The list is updated consistently to maintain accuracy. To see the full breakdown geographically, click here.
Written and published by Kyle Sonlin. Follow me on Twitter or LinkedIn. Read more here.
