What is the process for raising funds with a security token?

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A revolutionary way to raise capital while avoiding middlemen and high costs is here: in the form of a Security Token Offering (STO). Companies wishing to raise capital while avoiding middlemen and high costs can opt for a security token offering (STO).

It is similar to an initial coin offering (ICO), but the issuer recognizes the token as security. This is an incredibly unique opportunity: STOs allow companies to also raise capital for specific projects and allow investors fractional ownership, while raising more, losing less and having the ability to compete with other companies. ‘other companies on a limited number of options.

A security token is traditional digital security on the blockchain, backed by tangible assets, revenue, or company profits. Ownership is verified through the blockchain using smart contracts.

An STO allows a company to define the rights and terms of ownership of a token.

Investors buy security tokens with the expectation of future returns and are protected by security laws. Companies offering STOs are subject to the registration and filing requirements of the United States Securities and Exchange Commission (SEC). Some of the regulations that businesses must comply with are A+, S, and D regulations.

When choosing the STO route, it is crucial to ensure that the company complies with this regulation. INX is a company that has adopted all SEC standards and, in fact, has worked closely with traditional regulators to adapt the new alternative fundraising.

The process of an STO

Companies seeking investment through traditional investors may face more difficulty than those raising capital through an STO. Before the STO, companies must define what they are offering to investors, the quantity of the offer, the price and the underlying rights.

Companies can tokenize tokens based on assets, debts, stocks, funds and derivatives. Companies must stipulate whether token owners will have voting and information rights. They also need to determine the types of income owners will receive – dividend payments, profit sharing, debt coupons, or token buybacks.

It is important for companies offering an STO to establish a target market. Determining target investors will guide companies on factors such as the investment criteria and marketing strategy needed to attract those individuals or entities. When you know your target market is interested, you can assess the potential and capitalize on a good marketing strategy that will help you achieve your goal.

The value of a security token is based on the number of tokens created and the value of the underlying asset represented.

Businesses must meet legal, governance and regulatory requirements for their own benefit, giving people confidence in the process itself. Opting for an STO platform to transact means companies need to ensure that the platform can handle all the functions to issue tokens such as volume and checks.

Another consideration for businesses is cross-border tax implications. To make buying attractive to investors, companies can offer token ownership in a tax-efficient territory. This could result in the growth of an asset and a future increase in value in a secondary market.

A company makes a contract available to investors on the blockchain. The contract stipulates the terms and conditions of the sold securities, represented by the tokens. Investors have access to the contract once on the blockchain, and changes to the contract are flagged. Businesses can expect potential buyers to demand that buying decisions be made public.

With some STOs, companies make the tokens available only to accredited investors. After establishing accreditation status, companies can offer tokens directly to investors without a broker. Because STOs offer fractional ownership, investors don’t need a large sum of money to participate.

Few companies deploy a pre-sale promotional campaign for a token to draw attention to the STO like INX does. The sales period usually lasts one day, but it can extend over several weeks. Investors pay for tokens as stipulated by the issuer – fiat or cryptocurrency. INX is a unique company that follows all these elements in a meticulous method, in addition to its commitment to follow all future regulations.

Prospective investors should do their due diligence on the company offering the STO and can look for a business model that offers value over a significant period.

This post contains sponsored advertising content. This content is for informational purposes only and is not intended to be investment advice.

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