This month the security token sector saw some shake-ups as GSR Capital significantly downsized its investment into Overstock’s security token platform – tZERO. Originally, GSR Capital inked a deal for around $404 million. Then the firm reduced the amount again to just over $100 million. In the end, GSR invested only $5 million.
The First Deal
The original agreement, signed last summer, called for GSR to first invest up to $270 million in tZERO. Additionally, the firm was to invest an additional $104 million into Overstock shares. Lastly, GSR planned to spend $30 million on the tZERO ICO. In return, GSR would receive an 18% share in the tZERO platform and what equated to around a 10% share in Overstock.
GSR Capital – A Second Deal
In March, GSR altered the deal again. This go-around, GSR Capital planned to co-invest with Singapore-based Makara Capital. Both firms planned to invest up to $100 million in tZERO common stock. As part of this early March 2019 agreement, Makara Capital and GSR Capital would gain the right to host STOs on tZERO’s platform, plus an exclusive first look at future STOs slated for release on tZERO. Both firms would obtain full access to tZERO’s management, advisors, accountants, properties, financial records, previous agreements, and a host of other pertinent information.
The Final Investment
Despite all the hype, GSR ended up only investing $5 million in funding into the tZERO project. The investment came in the form of $1 million USD, $1 million Chinese Renminbi, and $3 million in various securities. Makara Capital has not stated whether they plan to continue with the $100 million previously discussed. Company executives stated that the firm is in the due diligence process.
In a recent interview, Overstock CEO, Patrick Byrne explained that tZERO released GSR from all previous contractual obligations. Elaborating further, tZERO CEO, Saum Noursalehi commented that the investment was still “decent”.
Despite the minor setback, tZERO is ready for business. Discussing the new investment platform Patrick Byrne, CEO of Overstock, took a moment to describe the excitement behind the project. He touched on the recent successful launch of the firm’s trading technology, and he explained how the company has multiple partnerships in the works.
Earlier in the month, Overstock sent a letter to shareholders asking for the right to tokenize A1 shares and move them to the tZERO platform. The new shares would now be known as “Blockchain Voting Series A Preferred Stock”. If successful, tZERO developers plan to eventually go full blockchain. Notably, an ERC-20 standard called OSTK.0 exists on the Ethereum blockchain and has for some time.
tZERO Steams Forward
Importantly, Overstock gave a demonstration of the tZERO platform this month at one of the company’s earnings calls. The demonstration showcased a mobile tZERO Dapp. This demonstration, combined with Overstock’s desire to convert its shares to tZERO, showcases just how far along the project has come. You can expect to see some serious moves from this team in the coming weeks as tZERO picks up steam.
Prometheum Acquires InteliClear Post Trading Systems
The popular security token exchange Prometheum announced the acquisition of the InteliClear clearing system this month. The addition places Prometheum as the front runner to be the first SEC-registered all-inclusive Alternate Trading System (ATS). The news showcases the growing competition in the sector and symbolizes a shift in strategies amongst the top exchanges.
An Industry First
Currently, no ATS has the ability to clear transactions in house. Traditionally, exchanges utilize a third-party clearinghouse to complete trades per the Security Exchange Act (SEA). This process adds time and additional fees to the transaction. Prometheum seeks to speed up the entire process via the InteliClear integration. Now clients can settle transactions in hours versus days.
Discussing the maneuver, Prometheum CEO, Aaron Kaplan called the acquisition a “milestone” for the security token industry. He spoke on why InteliClear’s system is an excellent addition to the company’s portfolio. Finally, he discussed the importance of Prometheum becoming the first end-to-end security token trading solution.
The Prometheum exchange entered the market with the goal to provide users with a complete ecosystem for tokenized securities. The New York-based firm was one of the first SEC approved tokenized securities platforms available to the public. The company originally filed with the SEC back in November 2017.
Today, the platform hosts some of the most notable security tokens ever launched including Lottery. The Lottery STO made headlines after providing investors an opportunity to participate in revenue derived from the company’s gaming platform for charitable fundraising.
Investors now gain access to more value after the InteliClear acquisition. InteliClear provides businesses with a host of helpful pre and post-trade services. The company uses a custom-built transaction engine that enables importation of trades and transactions from multiple sources. These turnkey and custom solutions enable businesses to fulfill their STO ambitions with the least amount of funding necessary.
The InteliClear system supports tokenized equities, options, fixed incomes, mutual funds, money/market products, and of course, tokenized assets. The global network is able to utilize a host of national currencies and can handle real-time, high volume, operations. The platform automatically calculates trade compression, fees, commissions, and billing to simplify the entire process for businesses.
Security Token Sector Gets More Competitive
The security token arena continues to see more competition develop. The recent SEC approval of numerous A+ filings enables platforms such as Prometheum to take its platform to the next level. Today, the number of security token exchanges in operation continues to expand at an impressive rate. Already, the SEC approved Blockstack, the Props Project, and YouNow’s STO platforms this year. After taking over a year to approve some of these projects, the news is welcomed by the cryptocommunity.
Prometheum Leads the Race
Prometheum now has the tools and capabilities to take a strong lead in the developing security token sector. You can expect to hear more from this exchange as it continues on its STO launch course. For now, Prometheum is the only security token exchange to provide such robust functionality in the market.
KoreConX Expands on Services Through POSConnect
It was recently announced that KoreConX has established a new alliance with payment solution specialist and tech provider, POSConnect.
This move will also see POSConnect join the KorePartners – a grouping/ecosystem of companies, brought together to provide a comprehensive suite of services to clients.
The alliance was undertaken with the goal of continuing development and functionality of the KoreConX capital markets platform. By integrating services provided by POSConnect, KoreConX will not only gain the ability to offer a secure payment solution, but build out their platform, aimed towards helping broker/dealers, and the management of security tokens.
Broker/dealers continue to play a pivotal role in the digital securities sector. Recognizing this, we recently took a brief look at the various designations doled out to industry participants, and the services they offer.
Oscar Jofre, CEO of KoreConX, stated,
“Our goal with building the KoreConX Capital Markets solution is to provide the much-needed infrastructure for the private company capital markets. We wanted to remove friction and fragmentation by bringing the tools necessary to one secure, user-friendly platform…We are thrilled to be working with a company such as POSConnect that not only provides the best technology but also follows the same governance standard that we do.”
Will Gravlev, President of POSConnect, stated,
“It is important for us to partner with companies that focus on offering the best solutions, and we believe that KoreConX is one of those. Their easy-to-use platform was created with the end-user always in mind, and the same goes for the solutions we offer.”
Founded in 2016, KoreConX maintains operations in New York. The company operates with the goal of providing a comprehensive grouping of services, aimed towards managing the core areas of a business. Through various established partnerships, along with the use of technologies such as blockchain, KoreConX is able to address a variety of needs, ranging from portfolio management, to cap-table management, and even investor relations.
CEO, Oscar Jofre, currently oversees company operations.
Acting as payment processing specialists, POSConnect is an established company, which maintains headquarters in Toronto, Canada.
POSConnect describes their core technology as a cloud-driven EMV/NFC payment solution, which was built with the intent of bringing new levels of efficiency to raising capital.
In Other News
KoreConX has been quite active over the past year, with their efforts resulting in multiple companies utilizing their services. Over the past few months, a variety of companies have decided to host a DSO through KoreConX. The following articles take a brief look at these announcements, and what to expect moving forward.
Warner Music Invests in CryptoKitties Creator, Dapper Labs
From Streaming to Blockchain
Warner Music Group has recently announced that they have invested in Dapper Labs. This investment, which came in to the tune of $11.5 million USD, was completed as Warner Music eyes new markets surrounding digital collectibles and non-fungible tokens.
In a digital world, where content pirating is commonplace, blockchain affords the ability to infuse digital content with pre-determined and ensured scarcity. As collectible markets are often driven by rarity, Warner Music believes that this move has potential to open new, lucrative doors.
CryptoKitties by Dapper Labs
If the name Dapper Labs sounds familiar, this is most likely due to the fact that they are the creators of CryptoKitties.
This blockchain based game became wildly popular in late 2017, as users worked to collect unique digital collectible kittens. Beyond its simple popularity, the game gained notoriety due to the fact that it, basically, stalled the Ethereum Network upon launch.
While the Ethereum network has grown stronger and more efficient in the time since, a simple game provided a stark reminder at the time that the blockchain industry was, and is, young and unproven.
Going with the Flow
The money being invested is intended to be used by Dapper Labs to create a new blockchain known as ‘FLOW’. This blockchain will be purpose built to handle applications such as CryptoKitties, and digital collectables.
Investors in Dapper Labs, which now includes Warner Music, will be receiving traditional securities representing company stock. What is unique about the move, however, is the future ability to convert these securities to tokens, which can be used on the platform yet-to-be developed.
The way the deal is structured, for this to occur, the SEC will need to provide their approval. Time will tell if the SEC shares the views of Dapper, and agrees on whether the tokens represent utility tokens, or security tokens.
To date, while the SEC has cracked down on many past ICOs which sold tokens viewed as securities, they have recently shown a willingness to work with companies being forthright with their intentions. This was made evident, most recently, as BlockStack completed their own token generation event. This particular event saw the SEC approve the sale of tokens, which were described by BlockStack as utilities.
In making their announcement, Jeff Bronikowski, VP of Business Development at Warner Music, took the time to discuss, with Forbes, their mindset. The following is what he had to say on the decision:
“When I was in college, you’d walk into someone’s room and you’d see 200 CDs and you would say, ‘That guy’s a big music fan.’ And now you just see somebody with a music subscription service and some playlists…We think that as people spend more time crafting their persona in the digital realm, digital goods and collectibles is a great way to express that fandom.”
Warner Music Group
Warner Music is a New York, New York, based company, which specializes in services surrounding the entertainment industry. From streaming services, to hosting a variety of record labels, Warner Music is all about helping artists, and delivering desired content to consumers.
CEO, Stephen Cooper, currently oversees company operations.
Founded in 2018, Dapper Labs is a Canadian company, which maintains headquarters in Vancouver, British Columbia.
CEO, Roham Gharegozlou, currently oversees company operations.
In Other News
The decision by Warner Music Group to enter blockchain is no surprise. Various subsets of the entertainment industry have dipped their toes into blockchain over the past year. Recently, this was seen through multiple partnerships involving film, and industry participants such as tZERO.