DigiShares has now completed the first round of their capital raise, a private placement round. The financing round was carried out as an STO (Security Token Offering) through DigiShares’ own issuance and shareholder management platform. An STO is a type of capital raise where shares are issued and offered for sale, as tokens on the blockchain rather than traditional shares.
With the first funding round completed, DigiShares will now launch the second phase of their capital raise, a public offering of approximately EUR 1 M, a small capital raise under EU regulations. Equity in the form of security tokens will be offered for sale.
Investors will receive shares in DigiShares with full voting rights, full rights for dividends, similar to a normal share. It is expected that the shares will be listed on a European security token exchange within 1 year after the sale to provide liquidity for investors. Also, investors will receive early access to participate in forthcoming capital raises on the DigiShares platform.
DigiShares is among the first in Europe to provide a software platform that can be used for investment funds, real estate funds, and later stage startups to raise funding by issuing shares as tokens on the blockchain and offering them for sale. These tokens represent securities and are fully regulated under the issuer’s jurisdiction. Tokens can represent equity, bonds or other types of customized securities with revenue-sharing rights, voting rights, etc. DigiShares helps design the tokens and smart contracts to correctly represent these securities and the platform then manages the entire process related to the registration and verification of investors, distribution and signing of subscriptions forms and shareholder agreements, continuously updated shareholder registers, as well as the distribution of dividends, voting, etc.
DigiShares partners with international exchanges for the listing and trading of security tokens as well as investor networks to help ensure that issuers can sell their tokens and provide investors with future liquidity. DigiShares also partners with legal advisors across many jurisdictions to provide assistance with setting up SPVs, drafting private placement memorandums, prospectus documents, etc.
Compared to traditional forms of capital raises such as private placements, public offerings, and IPOs, an STO is less expensive and more “liquid” since it is easier to reach global investors. The biggest benefit by far is the fact that security tokens are tradeable and will soon be traded on special exchanges in Europe. This means that angel investors putting money in startups will no longer be stuck for 5-8 years but may immediately trade their shares with others. In a similar manner, investors into real estate projects and investment funds may achieve liquidity much sooner than before. For this reason, investors are expected to prefer STOs over traditional forms of capital raise which will in return make it easier for companies to raise capital with an STO – and potentially allow for increased valuations.
The platform is provided under the DigiShares brand, but also increasingly as a white-label solution for companies that want to operate their own issuance platform. This could be STO consultants, legal and financial advisors, equity crowdfunding platforms, etc.
Claus Skaaning, CEO of DigiShares: “The swift completion of our private placement rounds seems to indicate a significant investor interest in the new world of tokenized securities. DigiShares is working with many partners to help bring the ecosystem into place such that companies can raise capital easier and with lower cost – and investors can enjoy much increased liquidity on their investments.”
The STO market is viewed as the “new ICO” and foreseen to become a very large market in the future, for instance by the World Economic Forum which has predicted that securities amounting to 10% of the GDP will be tokenized by 2025 ($12-14 trillion).