Reverse ICOs? Whoa! A vast majority of folks just learned what an ICO was only months ago and now its in reverse? Not exactly, but just like a reverse merger in the securities field, it’s a pretty smart idea. Seems like everyday there are more and more applications for ICO’s and the attorneys specializing in this sector are going to be very busy. Hello billable hours.
“Depending on who you ask, IPOs have been steadily declining over the years because of regulatory tightening, increased costs, or Wall Street resistance to tech. This means less liquidity for entrepreneurs and less growth for the economy.
ICOs (Initial Coin Offerings) are growing in popularity, but so far virtually all are new ventures that tend to skirt securities law. Luckily there is an entirely different type of ICO — the Reverse ICO — which is fully compliant and ideal for established companies. The first Reverse ICOs are still a few months away, but the process is quite clear.
Reverse ICOs aren’t for startups and they don’t avoid being classified as a security. Quite the opposite, they are intended for existing, successful companies and are assumed to be securities from the start, with some extra innovation sprinkled on top.
They are almost identical to traditional IPOs, following the same regulations, audits, and disclosures, but issuing tokens (electronic equity) instead of traditional stock. Because tokens are a new technology, they are more liquid, more flexible, and open to innovation.
Most important, token-based equity, combined with token economic modifications to company business models, may offer significantly better valuation for the mid-size technology ventures not yet large enough for a traditional IPO. These sorts of companies are the bread and butter of the tech industry…and of VC portfolios.
The cryptocurrency investor profile
ICOs are made possible, of course, by ICO investors. They are an entirely new class of investor created by the unprecedented rise of Bitcoin and other cryptocurrencies.
Seemingly overnight, software developers and Bitcoin enthusiasts have accumulated tens of billions of dollars, their holdings growing thousands of percent per year — so quickly that normal rules of finance don’t seem to apply. These new investors are technologically sophisticated, unimpressed by standard financial institutions, willing to invest millions on a hunch, and willing to give high valuations to firms that adopt next-wave blockchain technology…”
Full Story at VentureBeat