Cryptocurrency trading platform INX, aiming to be an all-in-one shop, is planning to raise up to $130 million through a security token initial public offering (IPO), registered with the U.S. Securities and Exchange Commission (SEC).
Gibraltar-based INX filed a draft prospectus with the SEC on Monday, to sell 130 million INX tokens, which are based on Ethereum’s ERC-20-standard. INX token holders will also be entitled to 40% of the company’s net cash flow from operating activities, but not as equity holders, per the prospectus.
Headed by Alan Silbert (brother of Digital Currency Group’s founder Barry), INX aims to set up two trading platforms – differentiating between security and non-security tokens. It also plans to get relevant regulatory licenses and approvals, including money transmitter licenses, a U.S. broker-dealer license and subsequent registration as an alternative trading system (ATS).
Initially, INX plans to obtain money transmitter licenses to operate in 8 U.S. states by the end of 2019, and in “most” U.S. states by the end of 2020, per the prospectus.
“When fully operational, we expect to offer professional traders and institutional investors trading platforms with established practices common in other regulated financial services markets, such as customary trading, clearing, and settlement procedures, regulatory compliance, capital and liquidity reserves and operational transparency,” the firm said, adding:
“In the future, the Company intends to establish a platform for the trading of derivatives such as futures, options and swaps.”
What makes INX’s offering different is that INX tokens will be registered as security tokens, while other companies who have recently received the SEC’s approval for their token offerings, such as blockchain startup Blockstack and live streaming platform YouNow – for their Stacks and Props tokens, respectively, are utility tokens.
INX’s offering is also unusual for conducting an IPO at a pre-product stage, while such offerings are traditionally for established, revenue-generating companies.
INX plans to utilize the IPO proceeds across functions, including research and development (up to $8 million), sales & marketing (up to $2.93 million), regulatory and legal (up to $3.2 million) and product development (up to $1.6 million), among other expenses, according to the prospectus.
The company has notable advisors on its board, including Jameson Lopp, CTO of Casa and Mark Yusko, CEO of Morgan Creek Capital, as well as David Weild, a former vice-chairman of Nasdaq, as one of its directors, among others. Successful fundraising would make INX one of the very few IPOs in the cryptocurrency space, followed by Argo Blockchain, which raised $32.5 million through an IPO on the London Stock Exchange.