Security token offerings

Thomas Lambert

doi:10.1007/s11187-021-00539-9

Security token offerings

2021-09-12

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AI

DOI：10.1007/s11187-021-00539-9

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Abstract

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This paper posits that distinguishing security token offerings (STOs) from initial coin offerings (ICOs) is important for the study of entrepreneurial finance. We first provide a working definition of a security token and present an overview of the STO market using a unique STO sample. The STO activity developed after the end of the ICO market bubble. The STO market is, however, still a nascent market. STOs are geographically dispersed but concentrated in jurisdictions with accommodating securities laws. Next, we explore STO success factors. We show that various issuer and offering characteristics traditionally used in the ICO literature also matter for STO success. We also find that success is associated with good governance practices, consistent with the corporate finance literature. We conclude by discussing the implications of native digital securities, the next generation of security tokens, for entrepreneurial finance. Plain English Summary The security token offering (STO) market is nascent and thus still under development but shows promises in the entrepreneurial finance landscape. A security token is a digital representation of an investment product recorded on a blockchain, which comes under the purview of securities laws. Therefore, STOs differ from initial coin offerings (ICOs). After describing the STO process and the scope of the STO market, we explore what factors are associated with successful capital raising. In particular, we find that attaching voting rights to security tokens increases the odds of success. Our study implies that entrepreneurs should carefully design their security tokens and run their offering professionally because doing so may not just help them raise more capital, but it may also foster general awareness of the benefits of a well-developed STO market.

Keywords:

Blockchain

Corporate governance

Entrepreneurial finance

Initial coin offering

Native digital securities

Securities laws

Security token offering

Tokenization

Security token offerings

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