The Gulf Time Newspaper One of the finest business newspapers in the UAE brought to you by our professional writers and editors.
Why should only the wealthy get to ride unicorns to further riches? Privately held firms with at least $1 billion in value come with daunting price tags that freeze out ordinary investors. Banks that help unicorns raise money are glad to chalk up a few bulky subscriptions — $1 million and more — from top clients. It works fine with regulators who don’t want the general public to lose their life savings on risky bets.
Were the ticket, say, $1,000, even affluent millennials might want to take a punt on the next Facebook Inc or Uber Technologies Inc without having to wait for a stock market debut. That wait is only getting longer. A sizable chunk of $2.5 trillion of uncalled private equity — dry powder — is with venture capital funds that promising companies can use to delay going public and spread the wealth more evenly.
The status quo is unfair. Until its recent initial public offering, the moneyed folk who would never deign to set foot in an Airbnb Inc property could buy in, whereas a younger, regular user could not. This gap in access could also be expensive. The “massive downward pressure on wages†that the International Labour Organization has forecast for the near term — particularly for women — could make it harder for millennials to build nest eggs if interest rates remain low for long.
But the existing setup lacks the technology to make private securities a mass-market product. “Private banks only show deals to clients with net worth above $50 million,†says Oi Yee Choo, chief commercial officer of iSTOX, a Singapore-based digital securities platform that aims to democratise finance by fractionalising it.
It’s not the first player to do so. San Francisco-based Forge Global Inc made available unlisted shares of Spotify Technology SA, Snap Inc and Square Inc to sovereign wealth funds, family offices and wealth managers. The Peter Thiel-backed firm is now expanding in Asia. The timing is right. Thanks to Airbnb and DoorDash Inc, venture-backed IPOs had a banner 2020, encouraging Asian unicorns to accelerate their own listing plans. The closer the offering, the greater the retail appetite.
Blockchain may offer a way to meet this demand. iSTOX, a startup that counts Singapore’s stock exchange and state investment firm among its investors, is turning securities into tokens on distributed ledgers. These aren’t public and permission-less like Bitcoin. iSTOX tokens have no value in the outside world. Nevertheless, by using them, time-consuming manual processes can be automated via smart contracts — software code that self-executes when conditions are met. A three-day settlement cycle can be shortened to seconds. Bespoke investments can be resized as tiny parcels.
—Bloomberg