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Slack’s Direct Listing: The Non-IPO Threat to Wall Street and its Future in Security Tokens

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Slack’s Direct Listing: The Non-IPO Threat to Wall Street and its Future in Security Tokens

By George Salapa, co-founder of bardicredit

After being paraded by Spotify last year, the direct listing has most recently been chosen by Slack, the second big brand name in tech to choose the direct route to market. Often described as a better, more efficient form of offering stocks to the market, with a direct listing companies offer shares held by their founders and early investors on a large public exchange. It is an outright rejection of Wall Street and its establishment.

Pages and pages have been written about Slack’s (and Spotify’s) nontraditional listings.

George Salapa

George Salapa

What is it that fascinates us so much about this news: a sheer hatred for bankers? Or could it be a sign of our age that we love to UBER-ize services and products by removing the middlemen and doing things directly? Why should bankers get the privilege of owning the IPO process? They spread the equity positions of what are often times highly sought-after companies between themselves and their institutional clients (first buyers), seeing through the ‘IPO-pop’.

And where will things go from here? How ‘direct’ will investment become? A much-discussed trend, security tokenization is emerging as a solution that could open up even private investments to global audience of investors. Security tokenization allows people to invest their money in private investments that would otherwise be inaccessible. Removing the tons of paperwork, and exclusivity, security tokenization opens up opportunities to small-time investors by breaking up assets into tokens that can be traded on the blockchain. Away with the middlemen (!), as the investors get infinitely closer to their investments.

IPOs vs. Direct Listings

Slack and Spotify might have been the first to choose a direct listing over an IPO and reject Wall Street while going public, but they certainly won’t be the last. IPOs are increasingly lamented as a broken process that favors Wall Street over early investors: Uber’s IPO flop ($8 billion) landed bankers $106 million.

However, direct listings are not the better option for everyone. Direct listings can be more risky – they mean that shareholders go direct to market, without the investment banks managing the pricemaking, and taking their shares on their own books. As such, arguably only big brands with plenty of publicity can afford to go direct.

But while companies that choose a direct listing over the Wall Street establishment may taking a gamble, it should be remembered that they also avoid bankers’ formidable fees. With IPOs, bank fees can be as high as 7%, whereas companies undergoing a direct listing would pay them on average 1%.

Companies that opt for a direct listing are the masters of their offering. As they disentangle themselves from the tribal world of Wall Street, they get closer to their shareholders in a move that can also work as a great PR stunt.

Security Tokenization: One Step Closer 

While direct listings are removing one large middlemen when it comes to public offering (Wall Street), investing is now becoming even more direct (and indeed inclusive) thanks to security tokenization.

Security tokenization is shaping up to be one of the most disruptive trends in finance. The tokenization of assets refers to the process of issuing a blockchain token that is a digital representation of (any) real asset.

At its core, it is about “cutting” real assets into regulated intelligent securities (“tokens”) tradable in a pre-programmed way on the blockchain. The token will know who can trade it and where it can be traded, or how it should distribute returns. A pre-programmed security token with encoded rules promises to remove the mounds of paperwork and the need for middlemen. And with it being on blockchain, it can be traded instantly, globally, and 24/7.

With security tokenization, the work of “financiers” is automated, and the institutional apparatus that is currently needed to connect managers and investors is removed.

Democratizing Private Investment

Removing the middleman through security tokenization also means democratizing access to investment opportunities. By breaking up large assets into individual tokens, exclusive investment opportunities that would otherwise be reserved for the super-rich are opened up. Essentially, security tokenization is doing to private investments what peer-to-peer lending has done to private lending by removing the lock-up, liquidity, and the lower minimum investment involved in traditional venture capital and private equity investing.

As well as tokenized VC investing, it is also becoming possible for a small investor to buy a stake in luxury assets such as a multi-million dollar Manhattan apartment, or a share in a new blockbuster movie or a hit album. By making these assets tradable on the blockchain, not only do small investors get their first chance at a piece of the pie, but the sellers themselves avoid the pressures that come with bank financing, and the tokens’ fungibility has the potential to improve the liquidity of private securities.

While both direct listings and security tokenization represent growing trends in finance that break with traditional structures and remove institutional middlemen – be them Wall Street investment banks or VC funding – they are distinct in exactly how much they disrupt the current paradigm.

Successful direct listings are proving to Silicon Valley that with the right conditions, companies don’t have to go down the IPO route when they decide to go public. This is an important step that allows well-known companies to bypass Wall Street fees and lockup periods, and reward early shareholders.

Security tokenization, on the other hand, is getting rid of the middleman in a much more disruptive way. By rendering traditional institutions obsolete, it represents complete disintermediation of the entire system. While direct listings can only go so far by serving the big names and their own shareholders, security tokenization has the power to change what investing means for everyone, from the Silicon Valley giants to small-time investors.

bardicredit is Swiss turnkey tokenization service. BC is helping fund managers and entrepreneurs to use tokenization for easier capital formation.

George Salapa is the co-founder of bardicredit. Before BC, George was in consulting (PwC), banking (Sberbank) and tech (smart data Braintribe). He also co-founded a smart city app (Shout Platform Ltd) and wrote for Forbes US.

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Stocks slip from highs; investors wait on Fed

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Stocks slip from highs; investors wait on Fed 1

By Matt Scuffham

NEW YORK (Reuters) – Global stocks slipped from record levels on Tuesday, with investors cautious as the Federal Reserve kicked off its two-day policy meeting and U.S. lawmakers continued to debate a new stimulus plan.

Those concerns overshadowed impressive results from a slew of companies, including from General Electric and Johnson & Johnson, which had earlier pushed the S&P 500 to a record high.

“Investors don’t expect the Fed to give any reason to think they are getting closer to talking about when they will consider scaling back QE, but nervousness is brewing on Wall Street,” said Edward Moya, senior market analyst at OANDA in New York.

Wall Street’s main indexes closed lower.

The Dow Jones Industrial Average fell 22.96 points, or 0.07%, to 30,937.04, the S&P 500 lost 5.74 points, or 0.15%, to 3,849.62 and the Nasdaq Composite dropped 9.93 points, or 0.07%, to 13,626.07.

The MSCI world equity index, which tracks shares in 49 nations, fell 1.99 points or 0.3%, to 666.09.

After a “buy everything” rally over several months supported by money-printing pandemic stimulus packages, near-zero interest rates and the start of COVID-19 vaccination programs, some investors are worried markets may be near “bubble” territory.

They point to rocketing prices of assets such as bitcoin or the soaring stock of short-squeezed videogame retailer GameStop.

“There is room for some consolidation,” said Francois Savary, chief investment officer at Swiss wealth manager Prime Partners.

Uncertainty over the timing and size of fiscal stimulus also tempered sentiment.

Disagreements have meant months of indecision in the United States, where new coronavirus cases have been above 175,000 a day and millions of people are out of work.

Democrats in the U.S. Senate will act alone to approve a fresh round of stimulus if Republicans do not support the measure, Majority Leader Chuck Schumer said.

U.S. Treasury yields were narrowly mixed in choppy trading, after hitting three-week lows on the long end of the curve, as investors remained cautious about the stimulus and the slow global roll-out of coronavirus vaccines.

Benchmark 10-year notes last rose 2/32 in price to yield 1.0347%.

The U.S. dollar edged lower across the board as traders showed a preference for riskier currencies.

The dollar index fell 0.2%, with the euro up 0.21% to $1.2162.

European stocks advanced, shrugging off political upheaval in Italy, as strong earnings from wealth manager UBS and auto parts maker Autoliv added to a string of upbeat corporate updates.

The pan-European STOXX 600 index closed up 0.6%, with a rally in automakers, industrial companies and SAP helping the German DAX outperform.

Europe’s broad FTSEurofirst 300 index added 0.64%, at 1,573.47.

The IMF raised its forecast for global economic growth in 2021 and said the coronavirus-triggered downturn in 2020 would be nearly a full percentage point less severe than expected.

Italy’s FTSE MIB rose 1.2% after Prime Minister Giuseppe Conte handed in his resignation to the head of state, hoping he would be given an opportunity to put together a new coalition and rebuild his parliamentary majority.1.2163

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 11.47 points or 1.58% in Asia overnight. South Korea and Hong Kong topped losers, each falling more than 2%. The sell-off also caused Japanese stocks to slip 1% and Chinese blue-chips to tumble 2%, their biggest one-day loss since Sept. 9.

All had touched milestone highs earlier this month.

Gold prices edged lower. Spot gold dropped 0.2% to $1,850.63 an ounce. U.S. gold futures settled down 0.2% at $1,850.90.

U.S. crude oil futures settled at $52.61 a barrel, down 16 cents or 0.30%. Brent crude futures settled at $55.91 a barrel, up 3 cents or 0.05%.

(Reporting by Matt Scuffham; Editing by Dan Grebler, Mark Heinrich and Sonya Hepinstall)

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Current cryptocurrencies unlikely to last, Bank of England governor says

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Current cryptocurrencies unlikely to last, Bank of England governor says 2

By David Milliken

LONDON (Reuters) – No existing cryptocurrency has a structure that is likely to allow it to work as a means of payment over the long term, Bank of England Governor Andrew Bailey told an online forum hosted by the Davos-based World Economic Forum on Monday.

“Have we landed on what I would call the design, governance and arrangements for what I might call a lasting digital currency? No, I don’t think we’re there yet, honestly. I don’t think cryptocurrencies as originally formulated are it,” he said.

Bitcoin, the best-known cryptocurrency, hit a record high of $42,000 on Jan. 8 and sank as low as $28,800 last week, far greater volatility than is found with normal currencies.

“The whole question of people having assurance that their payments will be made in something with stable value … ultimately links bank to what we call fiat currency, which has a link to the state,” Bailey said.

The BoE, like the European Central Bank, is looking at the feasibility of issuing its own digital currency. This would allow people to make sterling electronic payments without involving banks, as is currently possible with banknotes, and would in theory help avoid the volatility that renders bitcoin impractical for commerce.

Bailey said the appropriate level of privacy for digital currencies was likely to be hotly debated and was potentially underrated as a challenge in setting one up.

“This is a big one that is coming on to the landscape, the whole question of a privacy standard for transactions made in any form of digital currency, and where the public interest lies,” he said.

(Reporting by David Milliken, editing by Tom Wilson and Alistair Smout)

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EU sustainable investment rules need better corporate data – banking report

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EU sustainable investment rules need better corporate data - banking report 3

By Simon Jessop and Kate Abnett

LONDON (Reuters) – European Union rules aimed at defining sustainable investments should help reduce “greenwashing” by businesses, but better quality corporate data is needed to ensure they work effectively, a banking report said on Tuesday.

The sustainable finance rules will classify investments that can be marketed as sustainable, a move aimed at steering much-needed cash into low-carbon projects to deliver the bloc’s climate goals.

From January to August 2020, 26 of the region’s biggest lenders tested the EU framework across a range of core banking processes, including retail banking, trade finance and lending to smaller companies.

As the main providers of finance to companies across the EU, the ability of the banking system to track and report on whether corporate activities are sustainable or not could prove crucial in assessing the rules’ success or otherwise.

The lenders broadly welcomed the regulations as they seek to align their businesses with the transition to a low-carbon economy, the report by the United Nations Environment Programme Finance Initiative and the European Banking Federation found.

However, they also raised a number of issues, many of which were data-related and could require a phasing in of reporting requirements.

While many large companies are already required to disclose certain environmental and social information by law, the bulk of smaller and mid-sized banking clients are not, hampering banks’ assessment of their alignment with the rules.

Concerns over the quality, detail and standardisation of data is also an issue when looking at banks’ lending overseas, something that would be made more complex as other regions launch their own regulations.

The banks who tested the EU rules called on regulators to seek global alignment of regulations, and for better tools to manage data from clients, such as a centralised EU database.

While under no compulsion to lend to activities that can be classed as sustainable, banks see sustainable finance as a growth area that is likely to take on more importance in coming years should policymakers tighten environmental legislation.

With more investors globally looking to become shareholders of companies with a good record on managing environmental risk, banks are also likely to look to reduce their exposure to environmentally or socially harmful activities over time.

The European Commission is expected to finish the section of the rules covering climate change in the coming months, before they take effect in 2022.

(Reporting by Simon Jessop and Kate Abnett; Editing by Pravin Char)

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