Fractional Ownership Of Everything #Assetization #Tokenization (Part I)
Consumers are valuing experiences over possessions, hence a rising number of goods categories such as clothes, furniture, jewelry, houses, collectibles, vehicles are becoming available for rent or resell, or even split into shares that can be traded. Emerging 'assetization economy' where personal goods being treated assets, and tokenized for fractional ownership and tradability.
Examples are plenty:
Rental platforms for clothing and furniture has increased in recent years, fueled by the rise of rental startups such as Rent the Runway and initiatives by established companies such as IKEA
"The Uber effect is starting to trickle down to more personal goods."
Sharing economy platforms offering rent-out homes like Airbnb, and earning money using your cars alike Uber, with new options to own a part of the asset
Resale channels have been on the rise, making it easier for goods such as sneakers or handbags to change hands multiple times before eventually being recycled or destroyed
"The global luxury goods resale market, is expected to reach $51B by 2024"
Fractional ownership platforms to keep on expanding into a new range of goods including luxury cars, jewelry, or even art, making it possible to trade shares of these goods, many fueled by Blockchain technology and tokenization
Asset digitalization (aka tokenization) is creating a whole new user experience and investor opportunities. Digitizing an asset and using a smart contract enables the shares’ owners, for example, to sell shares of private securities on complaint exchanges on-demand with potential high liquidity, avoiding lengthily lockup of their money like with traditional investments. Assetization it isn’t doing anything to the financial security itself, but it changes the way ownership is managed and how the activities after the investment are automated. Automation, thanks to Blockchain technology, with advantages such as instant, secure, traceable and cryptographically secure distribution and transfer of highly customizable, digitized exchange units without the need for intermediary parties trusted by both sides of the transaction. Further, tokens are issued and settled on a Blockchain, which secures instant and effortless settlements without the need for issuing and signing stock certificates. Access to capital via blockchain is provided on a global scale 24/7. Any company (SME, MNC) can “tokenize” both common and preferred equity. Any individual can "tokenize" personal belongings and goods.
Example - Preferred Shares:
Preferred shares allow flexibility in designing shareholder rights. An issuer has broad discretion to attach certain rights and obligations to preferred equity without diluting the voting power of common shareholders or giving away the current management’s control over the company, and do not increase the company’s debt-to-equity ratio.
Issuers of preferred-share tokens could consider the rights and obligations that will attach to the tokens, including:
Dividends or distributions (discretionary or guaranteed; cumulative or non-cumulative)
Liquidation preference price and type
Conversion rights and obligations (option to be converted into common shares)
Redemption rights and obligations
Most digitized units offered for fundraising are considered securities, they have been commonly referred to as “security tokens” and an offering to investors in form of digital shares - tokens - a security token offering (“STO”).
No. of STO's by industry
Top 10 countries by STO's
STOs targeting U.S. and foreign investors require legal considerations:
Determining the optimal corporate structure and place of formation
Compliance with, U.S. securities laws and the Investment Company Act
Local law in the place of formation permits the issuance of shares on a Blockchain
Appropriate rights/attributes for the digitalized shares that will be issued
Reg A+ Tokenized Offerings
The exemption from registration for public offerings ratified in 2015 by the Jumpstart Our Business Startups (JOBS) Act as an amendment to Regulation A, commonly known as “Reg A+”, seems to be a good fit for public offering to retail investors. Reg A+ allows to raise up to $50 million in a 12-month period from an unlimited number of unaccredited (aka retail) investors without registration as a public offering, but subject to the SEC review and qualification of an offering statement filed on the Form 1-A. Reg A+ is limited to equity or debt offerings, including instruments convertible into equity and is only available to US and Canadian issuers.
FYI - the first tokenized projects filed their Forms 1-A as early as in mid-2017 and are still awaiting qualification!
...to be continued...
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Sources: Blockchain Advisory, GBBC, CB Insights, Dilendorf Khurdayan, BlockState, Manhattan Street Capital, IWS FinTech