By Cindy Taylor/Publisher
Play word association with me for a minute. When I say tequila, you think …. margaritas …. limes & salt …. beach …. anything else? Did I hear “blockchain” or “security token offering”? Didn’t think so.
But in fact, Texas-based Frontier Spirits, which has tequila included in its portfolio, has launched a Security Token Offering (STO) through technology enabled investment bank, Entoro Capital, said to be the first offering of its kind in the world. We’ve opted in the recent past to pull back on reporting around ICOs (Initial Coin Offerings), because there are so many ill-begotten or fraudulent versions of these spinning around the web, but STOs are an entirely different story.
We’ve written extensively on security tokens, which are a regulated version of ICOs, complete with SEC filings and investor qualification. In our opinion, they are a next gen version of P2P (peer-to-peer) investing and crowdfunding and the future of regulated finance. We have also published numerous articles in the past in which several high level industry players have asserted that tokenization of shares is the next logical step for the market:
- Canada’s ETF King Som Seif Says ETFs Will Soon Become Obsolete
- Tokenized Securities Entice Institutional Investors
In the meantime, STOs serve as a government-regulated and legally compliant way to raise capital for both new and existing firms and provide potential exit liquidity, after a defined lock-up period.
In the case of Frontier Spirits, the firm offering includes consolidation of two existing business units – PuraVida Spirits Company, which produces hand crafted tequila, and Luckenbach Road Whiskey Distillery under the Frontier Spirits umbrella offering Class B non-voting shares. The tokens associated with the raise are limited to 1,000,000 and the price is set at $32.50 per token. The capital raised will be used to transfer a percentage of ownership of the firm and build out a high end destination distillery and tasting facility in the Texas hill country. Exchange listings will be forthcoming and articulated when the tokens are issued.
Unlike other private placement vehicles, which can typically lock up investor capital for years, tokenization enables investors to sell their investment holdings to other qualified investors. In the case of Frontier Spirits, that potential exists after a one year lock-up.
Stewart Skloss, CEO of Frontier Spirits, explains “We chose to do a security token offering over a traditional raise because it allows our company a dual benefit: 1) raising capital, and 2) the attention we get allows the offering to create exposure to the brand, effectively creating a brand ambassador. Security tokens will be issued when the raise is complete and will provide investors potential liquidity after the lock-up period. This liquidity benefit allows investors to better manage their positions instead of being locked up for an indeterminate time in a traditional direct investment. This is an exciting time for Frontier and we look forward to building our brands, business, and world-class distillery in the Hill Country of Texas.”
According to Jim Row, CEO of Entoro, “Frontier Spirits is a beverage company, distillery and destination for investors. Combining quality brands of tequila and whiskey under one entity along with acquisition opportunities is a great way to get direct investment exposure to the adult beverage market. As an existing company, Frontier Spirits is at its inflection point of growth”.
Look for this asset class to become more mainstream in the coming years, as STOs gain traction – and credibility – with qualified investors.
DISCLAIMER: Investors need to understand that all investments hold risk, and do substantial research on any investments to ensure their risk suitability for their portfolios. FintekNews does not endorse this or any investment vehicle.